Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Royal Assent

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Iron and Steel Act 1982.
2. Food and Drugs (Amendment) Act 1982.
3. Civil Jurisdiction and Judgments Act 1982.
4. Taking of Hostages Act 1982.
5. Supply of Goods and Services Act 1982.
6. Local Government (Miscellaneous Provisions) Act 1982.
7. Firearms Act 1982.
8. Local Government Finance Act 1982.
9. Cinematograph (Amendment) Act 1982.
10. Forfeiture Act 1982.
11. Copyright Act 1956 (Amendment) Act 1982.
12. Feltham Station Area Redevelopment (Longford River) Act 1982.

PRIVATE BUSINESS

BRITISH RAILWAYS (LIVERPOOL STREET STATION) BILL (By Order.)

Order for Third Reading read.

To be read the Third time upon Thursday.

Oral Answers to Questions — SOCIAL SERVICES

Community Health Councils

Mr. Nicholas Baker: asked the Secretary of State for Social Services when he expects to conclude his consultations in respect of the future of community health councils.

The Under-Secretary of State for Health and Social Security (Mr. Geoffrey Finsberg): We have not commenced any such consultations, but we shall be considering the case for retaining community health councils in the longer term.

Mr. Baker: Does my hon. Friend agree that there is a good case for retaining community health councils where they are low cost, local and their object is to look after consumer interests? Is my hon. Friend aware of the general view that the Association of Community Health Councils for England and Wales is nothing more than a great sneeze? Thirdly,—

Mr. Speaker: Order. This is the first question. It is a bad way to begin.

Mr. Finsberg: As you have applied the handkerchief, Mr. Speaker, I shall deal only with the first of my hon. Friend's questions. We deliberately decided not to take that view at present. The new locally based district CHCs are settling in. We want to give them time to see what their experience is with the new districts before we look at them further.

Mr. Freud: Will the Minister consider with his right hon. Friend the Secretary of State for Defence the provision of facilities for a CHC for the 100,000 dependants of soldiers serving in the British Army of the Rhine, who are currently unrepresented as to their needs or desires?

Mr. Finsberg: I am sure that my right hon. Friend will be made aware of what has been said, but I shall pass that suggestion to him.

Mr. McNally: The Minister said that he would allow adequate time for the CHCs to work with the new district authorities. Does "adequate time" mean one, two or three years? Is the hon. Gentleman aware that in areas such as Stockport chiropody and physiotherapy posts are left unfilled, and that there is a need for the CHC to argue the consumer's case?

Mr. Finsberg: Before I came to this place I knew the meaning of "shortly", "soon" and "at an early stage". All I can say, after some years, is that we have said that we shall look at it "in the future".

Mr. Terry Davis: Has the Minister seen the statement by the new chairman of the Association of Community Health Councils, that, in his opinion, the Government intend to erode the powers of CHCs? Will the hon. Gentleman give an assurance that that is not the Government's intention? Does the Minister have any doubts that CHCs are an essential part of the National Health Service?

Mr. Finsberg: I have seen the statement. Like many other statements, if it is looked at in context it will be realised that it refers to legislation. Had the Government taken such a decision, they would have announced it. We have firmly said that we shall look at the matter in due course. I stick to that.

District Health Authorities (Building Grants)

Mr. Hooley: asked the Secretary of State for Social Services if he will consider the allocation of non-recurrent earmarked grants to district health authorities to deal with arrears of building maintenance and renovation.

The Minister for Health (Mr. Kenneth Clarke): No, Sir. Health authorities are responsible for carrying out their own maintenance programmes from within the resources allocated to them. As local needs vary greatly from district to district, it is sensible for individual health authorities to determine their own priorities.

Mr. Hooley: By setting cash limits that do not accord with the rate of inflation, have not the Government put district health authorities under such severe pressure that they cannot keep up with the necessary repairs and maintenance? Would not an ad hoc grant here and there greatly help?

Mr. Clarke: The allocation of moneys to the National Health Service generally has gone ahead of inflation. A considerable amount of growth money has been allocated to the Trent region, of which the hon. Gentleman's constituency is a part. Within that money it is for local authorities to determine their priorities. I am sure that they will give to building maintenance the priority that it justifies.

National Health Service (Finance)

Mr. David Atkinson: asked the Secretary of State for Social Services if he will make a statement on the financing of the Health Service.

The Secretary of State for Social Services (Mr. Norman Fowler): Between 1978–79 and last year we provided for 5 per cent. growth in NHS services. This year we shall be spending over £12 billion, which represents a further planned increase in real terms, although we are again asking authorities to make a contribution towards service growth through increased efficiency.

Mr. Atkinson: I thank my right hon. Friend for that encouraging reply. Would he care to comment on the report on the front page of The Guardian today that suggests that he is scrapping a circular to health authorities on the privatisation of hospital services?

Mr. Fowler: The report's author is set fair to become one of our leading imaginative writers. We remain committed to more contracting out where that saves the NHS money. That is not a doctrinaire policy; it is common sense.

Mrs. Dunwoody: As even the Minister's wholly inadequate pay offer will take 34 per cent. of the finance away from the RHAs, how does he reconcile the figure that he gave with his pledge that new money will go into the Health Service? Is he not cutting the finance available?

Mr. Fowler: Typically, the hon. Lady has it wrong. The amount of new money going into the Health Service will be reduced, but that is the inevitable consequence of the pay offer, for which she is doing nothing to secure a settlement.

Mr. Forman: In the sensible and generous funding of the National Health Service, will my right hon. Friend confirm that he has set his face against the expensive use of the insurance principle, in view of evidence from the Continent that that would make the service more expensive and less good value?

Mr. Fowler: My first aim is a partnership between the private and public sectors.

Mr. Ennals: As an increase of nearly 1 per cent. a year is required to cope with the ageing population and to keep pace with modern developments, is not the proposal for the next two or three years of a 0·5 per cent. increase a cut in NHS revenue?

Mr. Fowler: We have gone over this matter in the Select Committee, and the right hon. Gentleman knows that the figure is subject to review. The 0·5 per cent. planned increase, which comes from increased efficiency, is reasonable and is accepted by the regional chairmen.

Tinnitus

Mr. Knox: asked the Secretary of State for Social Services what is the value of grants from his Department for research into tinnitus.

Mr. Geoffrey Finsberg: The Department is currently funding an exploratory project into psychological aspects of adjustment to subjective tinnitus and the effectiveness of tailored masking at a cost of about £40,000 over a three-year period.

Mr. Knox: Does my hon. Friend believe that enough money is being spent on research into this distressing condition?

Mr. Finsberg: I agree that it is a distressing condition. One problem is that we are not receiving sufficient suggestions for research. If anyone has a suggestion, we shall see that it is carefully considered for grant purposes.

Mr. Straw: Is the Minister aware that tinnitus is terrifying for many sufferers?

Mr. Race: My hon. Friend should declare his interest.

Mr. Straw: I declare my interest. Is not £40,000 for research over three years derisory compared with the size of the task? Should not the importance attached to and the funding of the research be greatly increased?

Mr. Finsberg: As I said, one problem is that few projects for research come forward. I shall gladly listen to any ideas that the hon. Gentleman might have and put them to my experts.

Non-contributory Invalidity Pension

Mr. Ennals: asked the Secretary of State for Social Services when he now expects the review of the household duties test for housewives' non-contributory invalidity pension to be completed.

The Minister for Social Security (Mr. Hugh Rossi): The review is almost ready, but I cannot at present give a date for its completion.

Mr. Ennals: Why has the review taken so long, thereby creating frustration for tens of thousands of disabled housewives? Is the Minister aware that the Labour Government made plans to finance an improve-ment and that the National Insurance Advisory Committee put forward proposals over two years' ago?

Mr. Rossi: It does not lie in the right hon. Gentleman's mouth to quote the previous Government's record. They were forced to include married women in non-contributory invalidity pensions. It then took two years before they brought forward regulations to include them, which included the household duties test. They found that the test was being interpreted too widely, and, in four days in the parliamentary recess, they tabled regulations tightening up the test. Their record is disgraceful. The right hon. Gentleman, from his own unhappy experience—he was in charge for part of the time—knows that it is a complex matter.

Mr. Maxwell-Hyslop: Will my hon. Friend put in the Library a list of the questions to which he needs answers to formulate the review so that, before the House rises for the Summer Recess, hon. Members who are interested can write to him with such advice as may be within their power and observation?

Mr. Rossi: I am grateful to my hon. Friend for that suggestion. We intend to publish the results of the review and then to invite consultation.

Mr. Ashley: Is the Minister aware that the household duties test is not only offensive, as it discriminates against married women, but is the most unfair way of deciding a social security benefit, as each applicant has a different disability, every household is different and the equipment is different? Is it not time to abolish the test, especially as so many people are suffering from the results?

Mr. Rossi: I am aware of the many complaints about the test. We are not responsible for it being there. We are trying to grapple with the problem. To abolish the test completely would mean an additional net public expenditure of about £250 million.

Mr. Alfred Morris: Is it not at the very least disquieting that a report presented to the Government in July 1980 still has not been acted upon? Is the Minister aware that present Ministers, when in Opposition, argued as long ago as 1979 that the issue was straightforward and urgent? When will a decision be announced and will there be action in the next Session on the National Insurance Advisory Committee's report?

Mr. Rossi: The 1980 report asked the Government to carry out a review and to examine the position in other countries. We have been doing both those things. It has taken so long because of the nature of the inquiries and the complexity of the matter. As I said, the review is nearly complete and we hope to make an announcement in the near future.

National Health Service (Dispute)

Mr. Hoyle: asked the Secretary of State for Social Services what is the proportion of new money that is being made available to the regional health authorities to enable them to meet the current pay offer to National Health Service staff.

Mr. Hal Miller: asked the Secretary of State for Social Services what effect the pay offer has had on the finances available to health authorities for capital works.

Mr. Fowler: As my hon. and learned Friend indicated on 8 July, health authorities in England will be required to meet £32·2 million or 43 per cent. of the cost of the latest offers from within existing revenue allocations. With the additional money made available in March, the Government have provided a total of £161 million extra for pay, of which health authorities will meet £58 million or 36 per cent. The capital cash limits of regional health authorities will not be revised as a result of the pay offers, but authorities may need to review both their capital and revenue spending plans in order to meet their contribution to the costs of these pay offers, and authorities are able, within agreed limits, to switch funds from capital to revenue and vice versa.

Mr. Hoyle: Does the Secretary of State accept that the true cost is probably £59 million and that that will have a disastrous effect on patient care? If and when he gets down to meaningful negotiations on the pay claim, instead of political smears, so that patients do not suffer, will he ensure that it is funded from national resources, not from regional health authority budgets?

Mr. Fowler: I totally reject the hon. Gentleman's comments. The Government are spending more on the National Health Service in real terms than any Government have done in the history of the NHS. On meaningful talks over pay, I remind the hon. Gentleman that the Government have moved not once but twice, while the unions have remained inflexible on a completely unrealistic demand.

Mr. Miller: Does my right hon. Friend agree that it is not sensible to take resources from capital projects to defray increased salaries? Will he reconsider the position whereby regional health authorities are allowed to use funds in this way? Will he confirm, in particular, that the start on the long-delayed district general hospital in my constituency will not be further delayed as a result of these wage negotiations?

Mr. Fowler: I understand my hon. Friend's concern. These are some of the problems that we have sought to set before the public over the past two months.
As regards what my hon. Friend said about his own area, I gather that the West Midlands regional health authority will be holding a meeting to review its capital programme in a few days' time and that no decision has yet been taken to amend the capital programme.

Mr. Pavitt: Will the Secretary of State confirm that in the North-West Thames region the present growth is 0·03 per cent., and that, when the share of the £34 million extra wage costs goes to that region, there will be a decline, in real terms, in the money that is available? Will he have another look at the idea of switching from one budget head to another? As the year is already one-third of the way through, it will be impossible for district health authorities to do that. How, therefore, will he cope with the overspending which is inevitable in the North-West Thames region?

Mr. Fowler: The hon. Gentleman's premise depends upon how the share is worked out. I hope to make an announcement on the matter during the next few days. I think that the hon. Gentleman will find that his fears are not proved.

Mr. Dover: If some of the hospital staff on the medical side work normally in the first half of next week, will the Secretary of State, together with the regional health authority chairmen, look more favourably at the reallocation of any possible capital funds to those areas in future?

Mr. Fowler: At the moment, most people, including all medical staff, most nurses and many other staff in the Health Service, are working normally, and I pay tribute to their work. They are keeping the Health Service going in the most difficult circumstances. I have nothing further to add on capital resources.

Mrs. Dunwoody: Will the Secretary of State tell the House plainly why ACAS has decided that it has no role to play in talking to the Health Service unions? Is it because the Secretary of State refuses to put any new money on the table and that he is really talking about a direct cut in patient care?

Mr. Fowler: The Government have already put substantial new money on the table. The hon. Lady may shake her head, but the fact is that the Government have moved twice on this matter. The Health Service unions


have remained inflexible throughout. They remain committed to an unrealistic claim of 12 per cent., which in fact means 20 per cent.

Mrs. Dunwoody: When did the Secretary of State last speak to the Health Service unions? Is it not true that so far all the talks have been conducted by civil servants who have had a tight brief and have therefore not been able to do the job properly?

Mr. Fowler: The hon. Lady should start to read the newspapers. I spoke to the Health Service unions over two days of meetings about two weeks ago. I have told the unions—and the hon. Lady should take this on board—that if they want to come and talk to me about new arrangements for pay, my door is open and the talks can start immediately. If the hon. Lady is asking for more money, the answer is "No".

"University Grants Committee Cuts and Medical Services" (Report)

Mrs. Renée Short: asked the Secretary of State for Social Services when he expects to give his response to the report from the Social Services Committee entitled "University Grants Committee Cuts and Medical Services".

Mr. Kenneth Clarke: We are urgently considering the recommendations that the Committee made in its report. We hope to lay our response before the House shortly.

Mrs. Short: Assuming that the Minister has read the report by now, is he aware that the cut in the University Grants Committee resources to medical schools and universities is causing considerable anxiety in the medical schools? About 300 academic posts are frozen, affecting not only teaching but the research and patient care that academic staff carry out in National Health Service hospitals. Will he be able to find the £10 million that is required by the end of 1983–84 to put the matter right?

Mr. Clarke: I have, of course, read the Select Committee's report. With respect, the Committee has drawn some dramatic conclusions from some of the evidence that it received. My inquiries reveal—and we have had a survey—that so far 35 hospital posts with a substantial clinical content have been withdrawn, and that, of those, six have been taken over by the National Health Service. Those figures should be seen against a total of 35,000 hospital doctors throughout the country and an increase of more than 1,500 hospital doctors during the Government's period of office.

Mr. Andrew F. Bennett: Is it not regrettable that the Government imposed cuts on the universities in the first place, and deplorable that those cuts should find their way through to the Health Service? Is it not unfortunate that they will have an impact on the specialist shortages, particularly for the elderly, psycho geriatrics, and so on? Does the hon. and learned Gentleman agree that the Government should now reverse their policy of cutting money for universities and make good the necessary money both for the Health Service and education services in general?

Mr. Clarke: My right hon. Friend the Secretary of State for Education and Science has explained that university spending cannot be exempt from the restraints to which all public spending is subject. Medical education

is the most expensive form of higher education, and in the past it has been exempted from all cuts. This time it has not been singled out for special treatment; it is having to bear its share. However, we are concerned about the possible risk that might arise in the shortage specialty services. We have already drawn the matter to the attention of the University Grants Committee and the universities so that they can draw up their own priorities and decide where to make economies.

Mr. Rees-Davies: I agree with much of what my hon. and learned Friend said on this matter. However, does he agree that he should make an early response, because there is a good deal of misunderstanding about the extent of the cuts? Cuts there undoubtedly are, and cuts were expected. I hope that my hon. and learned Friend will make the matter plain as soon as possible for the reasons that I have given.

Mr. Clarke: I accept my hon. and learned Friend's advice that it would be as well to make an early response, because it is important to get the impact on the Health Service into perspective. For the reasons that I have given, I think that the impact on patient care is comparatively slight.

Elderly Persons (Home Care)

Mr. Freud: asked the Secretary of State for Social Services if he will give the latest estimate of the numbers caring full-time for elderly and handicapped people in their homes; and how many of these carers are married or cohabiting women.

The Under-Secretary for Health and Social Security (Mr. Tony Newton): There is insufficient information available on which to base a reliable estimate.

Mr. Freud: Does the Under-Secretary accept that carers are saving the country millions of pounds, often at great financial cost and personal sacrifice? Is it not time that his Department turned praise for carers into hard cash? Will he now extend the invalidity care allowance to married and cohabiting women?

Mr. Newton: I accept that we all owe a debt of gratitude to these people. We should like to extend invalidity care allowance as and when resources are available, but to carry out such an extension would, according to the last estimate—it was pretty rough and ready and was made two years ago—cost about £100 million gross. We think that that is probably an underestimate. Therefore, the hon. Gentleman will understand that there is a problem in moving as fast as we should like.

Mr. Alexander: Is not the purpose of the invalidity care allowance to compensate those who cannot work, while relieving the State of burdens? If so, while accepting the financial constraints, may I ask whether there is any reason why it should not be extended to people regardless of sex, whether they be cohabiting women or not, who relieve the State of the same burdens?

Mr. Newton: I accept that there is strong argument for moving in that direction. However, like all Ministers in the Department, I have the problem of where to find the resources.

Mr. Carter-Jones: The Minister was a member of the Committee that passed the ICA and HNCIP in the hope


that the weak in our society would be cared for. That applies to women and men equally. Why do we have we got the household duties test?

Mr. Newton: The hon. Gentleman is surely referring to the HNCIP in mentioning the household duties test, whereas the main thrust of questions has rightly been concerned with the invalid care allowance. That was formerly confined to relatives. We have now extended it to non-relatives. We should like to extend it further, but we are not able to do so at this precise moment.

Mr. John: Will the Minister take this opportunity to deny that, in an attempt to buy off the revolt in the House later this afternoon, he said that the refusal to make good the 5 per cent. shortfall would be diverted to that end? Does he regard that, as I do, as wholly unacceptable both to the unemployed and to those who are caring for sick relatives?

Mr. Newton: I have not said that, nor has my right hon. Friend the Secretary of State, to whom the hon. Gentleman may be referring. No one can make decisions about social security matters on any one front without recognising that there must be decisions on priorities. Money that is spent in one area literally cannot be spent in another.

Private Practice

Mr. Teddy Taylor: asked the Secretary of State for Social Services if he will make an estimate of the current cost benefit to the Health Service of the existence of private practice.

Mr. Fowler: In 1981–82, income for the National Health Service from private patients treated in NHS hospitals in England was about £52 ½ million. Substantially more than that is spent on health care within the independent sector. The main benefit of private health care is that it adds to the total resources available and offers patients a wider range of choice.

Mr. Taylor: Does the Minister agree that the increasing complexity and cost of hospital treatment, and the substantial increase in percentage of elderly people in the population, make it difficult for any Government to find the resources to maintain a universal free service? In those circumstances, will the Minister do all in his power to encourage organisations such as BUPA, so that resources can be directed into the Health Service and existing strains upon it reduced?

Mr. Fowler: I agree with everything that my hon. Friend has said. We must achieve a partnership between the provision of private health care and the National Health Service. That is the aim of Government policy and could lead to good results for the public.

Mr. Cryer: Will the Minister set against that £52·5 million the costs arising from private patients? Can he quantify the cost of the use by consultants of National Health Service facilities for private purposes? Can he also quantify the cost of the training, using National Health Service facilities, of the people who enter the private sector, which provides no training whatever?

Mr. Fowler: The contributions are made by the private health service direct to the regions involved. To repeat

what I said earlier, in addition to our private health policy we are increasing our pro vision to the public Health Service.

Mr. Bill Walker: Does my right hon. Friend agree that those who make use of private health facilities in Britain have already contributed through the Exchequer to any share of health services that they enjoy?

Mr. Fowler: That is right. I believe that it is the overwhelming view of hon. Members that the public should have a right to pay insurance for their health care.

Mr. Terry Davis: Will the Secretary of State now answer the question? If he is claiming a revenue of £52½million for the National Health Service, what is the cost of providing those services?

Mr. Fowler: There is no neat answer to that. [Interruption.] There are costs involved. Money goes direct to the regions and is in addition to the regional funds.

Chronically Sick and Disabled Persons Act

Mr. Homewood: asked the Secretary of State for Social Services if he is taking further action to ensure full enforcement of the Chronically Sick and Disabled Persons Act; and if he will make a statement.

Mr. Litherland: asked the Secretary of State for Social Services if he will be taking any action in the light of the seminar held on 20 May by the Royal Association for Disability and Rehabilitation on the results of the project to achieve full enforcement of the Chronically Sick and Disabled Persons Act.

Mr. Rossi: The implementation of section 2 of the Chronically Sick and Disabled Persons Act 1970 is a matter for the local authority in any particular case, but if I am provided with evidence that a local authority may not be performing its statutory duty I am ready to make inquiries about the position, as I have done in several cases, with gratifying results. No report of the RADAR seminar has been received by my Department and I am not aware of any firm conclusions reached.

Mr. Homewood: Has the Minister seen the reply to my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) of 8 June, which said that hospitalisation in Britain is costing about £26,000 per year per person? The disabled persons' entitlement under the 1970 Act does not remotely approach that figure. Therefore, is it not in the interests of Britain, and certainly in the interests of the disabled, that the Minister should ensure that the full benefits of the 1970 Act are applied? Is it not inhumane that he has not done so?

Mr. Rossi: As I have already said, whenever cases of breach of statutory duty are brought to my attention they are fully investigated. There have been several such cases investigated with gratifying results. Of course, rehabilita-tion rather than perpetual residence in hospital, and trying to move the mentally handicapped out of institutions, are desirable objectives which we are attempting continually to achieve.

Mr. Litherland: Will the Minister explain why his Department was not represented at the conference held by the Royal Association for Disability and Rehabilitation on


20 May? Does he not think that that absence was scandalous and that it highlights the Government's complete indifference?

Mr. Rossi: As far as I am aware, no invitation was received to attend the seminar. We received the report that preceded the seminar and that was debated in an Adjournment debate in the House on 26 April, when I gave the Government's reactions to it.

Mr. Rees-Davies: I congratulate the Minister on the excellent work that he has done for the disabled. Would he be good enough to draw the attention of those local authorities which are not carrying out their duties effectively to the excellent work done by other local authorities and thus, by precept, give them an incentive to improve their work?

Mr. Rossi: I believe that local authorities are aware of what is and what is not being done. The matter must be considered in the light of the report to which I have just referred. Tens of thousands of people are helped under the Act every year by local authorities. RADAR identified about 1,000 cases of those tens of thousands which it felt required investigation, and of those 1,000, 13 were referred to my Department for investigation.

Mr. Skinner: Is not the truth of the matter that the Government have deprived local authorities of sufficient money to carry out the Chronically Sick and Disabled Persons Act to the extent that they would like? Does he recall the recent answer to the parliamentary question which showed that the number of telephones going to old and disabled people under the Chronically Sick and Disabled Persons Act had dropped from 16,000 to 8,000 since the Government came into power? If the Government want to do something about it they should give authorities the money.

Mr. Rossi: Since the Government came into office there has been growth in real terms in expenditure on personal social services.

Mr. Alfred Morris: Will the Minister make a statement to the House about the leak in The Guardian last Thursday on the report of the expenditure steering group for personal social services to the effect that local authorities now face a cut of a further 28,000 jobs in their social services departments? How can the Minister possibly justify depriving 70,000 elderly and disabled people of their home helps? May the House now have a full statement instead of newspaper leaks?

Mr. Rossi: It is clear that the right hon. Gentleman did not see the rejoinder the next day by my hon. and learned Friend the Minister for Health, who made it plain that the report was totally inaccurate.

Home Helps

Mr. Gwilym Roberts: asked the Secretary of State for Social Services if he will take steps to ensure that the number of home helps available is adequate to meet the future needs of long-term sick and disabled people.

Mr. Kenneth Clarke: Responsibility for ensuring that the number of home helps available is adequate to meet the needs of a particular area rests with the local social services committee.

Mr. Roberts: Does the Minister accept that cuts in the rate support grant make it impossible for the great bulk of

local authorities to comply with the Government's guidelines for home help provision? Is it not deplorable and hypocritical that the Government set down fictitious guidelines and deliberately go out of their way to make sure that local authorities cannot comply with them?

Mr. Clarke: The hon. Gentleman's question enables me to underline the gap between hypothetical guesses based on the sort of reports that have been referred to and what is happening on the ground. It is not true that there has been a reduction in home help services. There has been a steady increase in the services under this Government and latest figures show that there is still a steady increase in the number of hours of home help provided.

Mr. Hannam: In considering any changes in the structure of social service workers, will my hon. and learned Friend have regard to the pre-Seebohm system, under which visitors gave the sick and disabled specialist advice, rather than a general provision of services, as is given by social service workers at present? Will my hon. and learned Friend consider returning to the system under which health visitors and home helps give that specialist advice?

Mr. Clarke: I can see difficulties in trying to go back to the pre-Seebohm organisation, but these matters need review from time to time and I will look at my hon. Friend's ideas.

Mr. John: Can the Minister explain why, as he announced earlier this year, the Government have ceased to collect home help statistics?

Mr. Clarke: Because the Government collect far too many useless statistics on one thing and another.

Mr. J. W. Rooker: Useless?

Mr. Clarke: In this case, perfectly adequate figures are collected by CIPFA. They show that the number of hours of home help provided is increasing. I am not guessing; I am merely not collecting two sets of figures to prove the same good news.

Peterlee (Community Hospital)

Mr. Dormand: asked the Secretary of State for Social Services if he will take steps to expedite the provision of a community hospital in the new town of Peterlee.

Mr. Kenneth Clarke: This is a matter for the Northern regional health authority to decide in the light of local priorities and available resources.

Mr. Dormand: Is the Minister aware that there has been a great deal of talk but no action on this matter for several years? Is he further aware that the excellent site for the hospital which has been reserved by Peterlee new town development corporation may not be kept for much longer? As the overwhelming case for the hospital was accepted a long time ago, will the Minister stop giving bland answers and exert his power on the Durham health authority and the regional health authority to get an early priority for the hospital so that building can start soon?

Mr. Clarke: I hope that my answer was not too bland. The regional health authority has to do the difficult job of deciding its priorities in the region, within the available resources. It has to decide how early in the queue it can


put the Peterlee community hospital, which, I accept, everyone has been planning on for some years. Meanwhile, the hon. Gentleman's constituency is being served, because the second phase of the Hartlepool district general hospital, which serves his constituents, will be completed next year.

Disablement Cost Allowance

Mr. Parry: asked the Secretary of State for Social Services whether he has given further consideration to the issuing of a discussion document on the establishment of a disablement cost allowance.

Mr. Rossi: My right hon. Friend has no plans to issue such a discussion document at present.

Mr. Parry: Why did the Government in 1979 give massive tax handouts to the wealthiest 5 per cent. of the population while immediately breaking up the DHSS team that had been working on the establishment of the new benefit with my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris)? Is the Minister aware of the growing anger of the disabled and their organisations throughout the country at the indolence of the Government and the cynical neglect of the needs of the disabled?

Mr. Rossi: The hon. Gentleman has got his facts wrong. The previous Administration made no public statement that they intended to issue a Green Paper on provision for the disabled, as has been hinted from time to time. In addition, no financial provision for further assistance to the disabled had been made in the public expenditure White Paper that this Government inherited.

Mr. Ashley: I thought that the Government were committed to the principle of a cost allowance. If the Minister is not prepared to give us even a discussion document, will he tell us when the allowance will appear?

Mr. Rossi: We have made it clear that our first priority is to strengthen the economy. I regret that until that has been achieved no progress can be made towards our objective of a coherent system of benefits for disabled people, which will cost thousands of millions of pounds. Despite the restraints on public expenditure, we have made limited improvements in benefits, notably in the mobility allowance.

National Health Service (Dispute)

Mr. Canavan: asked the Secretary of State for Social Services whether he will make a statement about the Health Service workers' dispute.

Mr. Fowler: Since my statement to the House on 23 June announcing the Government's final decisions on the resources available for this year's pay round, detailed offers have been made by the management sides of several Whitley councils, including the nurses and midwives and the ancillary staffs council. On average the offers range between 6 and 7·5 per cent. and are in line with what several million people in both the public and private sectors have already accepted. The Health Service unions should now return to the negotiating table. There can be no justification for the industrial action, which is damaging the Health Service and harming patients.

Mr. Canavan: What reply has the right hon. Gentleman sent to the doctors in the Medical Practitioners

Union who fully support the 12 per cent. claim and state that any risk to patients as a result of next week's three-day strike will clearly be the fault of the Secretary of State? In view of the billions of pounds of military expenditure, will the right hon. Gentleman explain why the Government place more emphasis on the manufacture of weapons of death than on ensuring a decent living wage for people who are concerned with the saving of life?

Mr. Fowler: The organisation that the hon. Gentleman mentioned does not represent the great body of the medical profession. The hon. Gentleman would do himself, his party and the country much more good if he would condemn industrial action in the NHS, which harms patients.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Roy Hughes: asked the Prime Minister if she will list her official engagements for Tuesday 13 July.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today. This evening I am presiding at a dinner for the Prime Minister of Singapore.

Mr. Hughes: Amid the dying embers of the Falklands euphoria, will the Prime Minister spare a moment to look around at the real state of Britain today under her Administration? Two major industries are disrupted and there are rumblings in several others. Between 3 million and 4 million people are unemployed. Is the Prime Minister aware that production is stagnant and that investment is largely going overseas? Is it not time that the Government introduced some bridge building to try to bring all sections of the community together? Does she agree that the best means of doing that would be to put people back to work?

The Prime Minister: The hon. Gentleman mentioned two industries that are on strike. I hope that he will condemn those strikes, so that the train drivers will go back and the railways may become modern and efficient, which they can do only if British Rail's proposals are accepted. Secondly, I hope that the Opposition will condemn the strike in the NHS, because it is causing harm to patients, who are suffering.
The hon. Gentleman will have seen the production figures out today. The all-industries index for May is provisionally estimated at 1 per cent. higher than April and the manufacturing index recorded an increase of 1½ per cent. With regard to investment: going overseas, the hon. Gentleman will probably also have seen that it is providing a good deal of invisible income for this country, which we need to cover the interest and dividends going out on inward investment here.

Mr. Greenway: While I appreciate the independent mind that Assistant Commissioner Dellow will bring to the inquiry that he has been asked to undertake into the grave state of Buckingham Palace security, will my right hon. Friend consider the establishment of a long-term inquiry by a few people, comprising a detective, a representative of the Army and perhaps a representative of the police, to


take a deep and long look into the security of the Palace, the person of the Queen and other Royal establishments and personages?

The Prime Minister: I hope that we shall receive the Dellow report next week and that it will give a thorough review of the security matters surrounding the Queen and other members of the Royal Family. There are clearly at least two major points to be inquired into: first, whether the systems themselves were adequate for protection; and, secondly, whether those systems were properly operated by the people at the time. I hope and believe that the inquiry will be very thorough. When we have received the report we shall certainly consider my hon. Friend's proposal.

Mr. David Steel: Will the Prime Minister tell the House what advice the Secretary of State for Transport gave to the chairman of British Rail at their meeting yesterday?

The Prime Minister: It is not customary to publicise any advice which may or may not have been given. May I make it perfectly clear that we stand behind the British Railways Board in its efforts to achieve a modern and efficient railway service.

Mr. Eggar: With regard to the question that my right hon. Friend has just answered, has she noted that the Leader of the Opposition has yet again put the interests of a small, Luddite union in front of the interests of commuters and the national interest? Is she aware that there is one thing, and one thing only, that commuters in particular will never forgive, and that is a return to peace on the railways without real productivity gains?

The Prime Minister: Yes. I wholly agree with my hon. Friend. Other industries in this country, including nationalised industries, have made strenuous efforts to increase productivity, even though it has meant a number of redundancies, realising that we must live in this decade if we are to raise sufficient income for all our people. I noted the Leader of the Opposition's support for ASLEF. Indeed, he seems to have become the strikers' friend.

Mr. Foot: I am a friend of a peaceful settlement in the railway industry, as in others. With regard to the railway strike, which has great dangers for the railway industry and the community at large, will the right hon. Lady or one of her Ministers at last make an effort to try to achieve a settlement? Has she had a chance to compare the proposals that were made by the British Railways Board on 25 June with the proposals that were available and were ready to be accepted by ASLEF on 3 July? Having looked at them, does she not agree that those proposals are very close and that therefore if only the Government would make an effort, a settlement could be reached? When will the Government do their duty in that respect?

The Prime Minister: No. I do not agree with the right hon. Gentleman. We want a settlement on terms and conditions that will produce a modern, efficient railway. Nothing less will do for Britain, nor for those many commuters and workers who rely on the services that the railway can provide. I disagree with what the right hon. Gentleman said about that offer. It is an offer to call yet another conference. That is not sufficient.

Mr. Foot: The right hon. Lady has apparently been misinformed on this most important subject. If she is in

favour of achieving a settlement on reasonable terms, does she not agree that reasonable terms were offered by the British Railways Board on 25 June, that it was a pity they were not accepted then—[HON. MEMBERS: "Ah!"] Yes, a pity that they were not accepted then; but when they were accepted 10 days later, surely the Government and the Railways Board should now be prepared to stand by the offer that they originally made? Surely that is the way to achieve peace. I urge the right hon. Lady once again not merely to stand on what she said but to get one of her Ministers occupied on the business of achieving a genuine settlement of the dispute.

The Prime Minister: I do want a genuine settlement. I believe that that is what the British Railways Board wants and is going for. I am more in agreement with Mr. Sidney Weighell than with the right hon. Gentleman, when Mr. Weighell said:
No amount of smokescreens can hide the fact that the train drivers have refused to accept a decision on flexible rostering, which my union is operating. This is a narrow, stupid, sectional dispute and it is causing untold damage to the railways.

Mr. Peyton: Does my right hon. Friend agree that it would be interesting to know whether the Leader of the Opposition first consulted Mr. Sidney Weighell before he plumped in support of ASLEF?

The Prime Minister: I entirely agree with my right hon. Friend. Mr. Sidney Weighell on another occasion, when referring to the leader of the Labour Party, said that what he had been saying was what he expected the leader of the Labour Party to say.

Mr. Foot: Is the right hon. Lady aware that what I plumped for was the settlement proposed by Mr. Len Murray, which her Government and the British Railways Board are now apparently rejecting? I urge the right hon. Lady once again to examine the proposals for a settlement, which are still available, and which are the basis on which a real solution could be secured?

The Prime Minister: No, they are not. The right hon. Gentleman has become, and remains, the strikers' friend.

Dr. Mawhinney: asked the Prime Minister if she will list her official engagements for 13 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Dr. Mawhinney: Has my right hon. Friend seen reports that, because of strike action and picketing by NUPE members at St. Thomas's hospital, six wards, including a children's ward, have had to be closed and the number of operations per day has been reduced from 120 to 30? Does my right hon. Friend really believe the unions claim that their action is not affecting the sick?

The Prime Minister: I understand that the facts given by my hon. Friend are correct, that about 1,000 operations have been postponed. That means that the unions are damaging patient care.

Mr. Hoyle: You are!

The Prime Minister: I do not believe that that is what trade unionism stands for. What has been offered is a final offer. It is the percentage that has been accepted by the Armed Forces, the Civil Service, the doctors and the teachers and should now be accepted by the National Health Service workers.

Mrs Renée Short: Is the Prime Minister aware that, in my constituency—

Mr. Skinner: The Prime Minister is the workers' enemy.

Mrs. Short: I hope that my hon. Friend will let me have a go. Is the Prime Minister aware that the Goodyear tyre plant in my constituency, which is the largest employer, has recently declared further massive redundancies of about 560 workers? Is she further aware that that is in a town where there is 17 per cent. unemployment, and in a country where there are more than 3 million unemployed, a million of whom have been out of work for more than a year? What does the Prime Minister intend to do to restore the prosperity of the West Midlands region, which was one of the most prosperous regions in the country before her Government came to office?

The Prime Minister: We shall restore the prosperity of the West Midlands and every other region only if our companies and their work forces are competitive in the goods that they produce. There is no other way. Only by that means shall we be able to get a larger share of world trade. The hon. Lady will perhaps have noted that the number of imports, particularly in semi-manufactures, rose last month, which means that we are still not yet competitive and have a long way to go.

Mr. Douglas Hogg: Does my right hon. Friend agree that the Leader of the Opposition is not merely the strikers' friend, but, in addition, by his support of ASLEF, is putting at risk the jobs of thousands?

The Prime Minister: Yes. I believe that that is precisely what is happening, particularly in some of the heavy and chemical industries, which rely on the railways for moving their products.

Mr. Alton: asked the Prime Minister if she will list her official engagements for Tuesday 13 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Alton: Is the Prime Minister aware that during the last 12 months, 349,000 homes in the United Kingdom were broken into, and that in my area of Liverpool, one home is broken into every 20 minutes? Will the right hon. Lady explain what action she intends to take to increase the paltry sum of £23,000 made available to the national victims' support scheme each year? Will she also agree to provide intruder alarms for all people of pensionable age?

The Prime Minister: I cannot agree to provide intruder alarms for everyone. As the hon. Gentleman knows, we have done everything possible to bring the police forces up to establishment, to pay them exactly what the Edmund-Davies committee stated and to see that they are properly equipped. We also rely on the standards of ordinary citizens to see that crime is prevented by doing as much as they can to keep the police informed and to help them and support them in their difficult duty.

BILL PRESENTED

DISPOSAL OF PUBLIC ASSETS (COMMERCIAL INFORMATION)

Mr. Lawrence Cunliffe presented a Bill to ensure that before any shares in a publicly owned industry are disposed of the Government shall lay before Parliament all the commercial calculations on which the judgments regarding price, method of disposal and timing of sales are based; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Wednesday 14 July and to be printed. [Bill 164.]

BUSINESS OF THE HOUSE

Ordered,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill, notwithstanding the practice of the House as to the interval between the stages of Bills brought in upon Ways and Means Resolutions.—[Mr. Thompson.]

Water Rates (Provision of Rebates)

Mr. Dafydd Wigley: I beg to move,
That leave be given to bring in a Bill to amend the Water Act 1973 to allow water authorities to vary their scale of charges so as to distinguish between water rate imposition on single person households, pensioners and families on low incomes, and other categories of consumers; and for related purposes.
You may be aware, Mr. Speaker, that this is not the first time this year that I have mentioned water charges in the House. They are an issue of great controversy in Wales. However, the Bill that I seek to introduce will be of benefit not only to people in Wales but also to pensioners and others on low incomes everywhere. The Bill relates to the unfairness of the impact of the present system of water rates on those most vulnerable in our community. The burden of water rates has increased enormously on all groups in the population over the last eight years. In Anglesey in my own county of Gwynedd the water rate in 1973–74 was 3·6p in the pound. It is now 28p in the pound, an increase of 800 per cent.
This increase, like all inflation, hits particularly hard those on low incomes, pensions and fixed incomes. The National Old Age Pensioners Association of Wales has written to me stating:
Our members are adversely affected by the way in which the water rate is based on rateable value. This latest increase will make it a hardship for many to pay, and if you have been thrifty, bought your own house and put by a little money so that you are not a burden to your children, then it is impossible for you to get help to pay the extra.
I have also had an opportunity to study the headquarters files of the citizens advice bureaux on this issue. From all parts of England as well as Wales, dozens of formal representations have been made by their local staff calling for a rate rebate to be available on water rates for those on low incomes or pensions. This is a general and widespread complaint and one which will be known to every hon. Member.
I wish to make it clear that water rates hit not only those who own their own homes but also those who are in rented dwellings, whether council houses or privately rented houses. The increase in water rates hits them just as hard. In those areas where direct billing to council houses has recently been introduced, the impact of this burden is felt particularly acutely. Likewise, many private landlords who formerly used to collect the water rates as part of the rent, now insist that water rates are paid directly to the water authority by the tenant.
The unfairness can be summed up by four cases. Mrs. A, a widow living on a pension in Caernarvon in a one-bedroom rented flat, is having to pay £127 in water rates this year. Mr. and Mrs. B from Clwyd, aged about 80 and living in a small flat, have a bill of over £100. Mrs. C, who wrote to me from Glamorgan and who is another pensioner, had to sell her sewing machine to pay the electricity bill. When the water bill of over £100 came along, she had to consider what other personal possession she would have to sell to pay the bill. Mr. D of Harlech, who has been on invalidity benefit, having had to retire with angina in 1946, lives in a two-bedroomed small bungalow and has a water rate bill of £132.
The nub of the problem is that the water rates payable depend on one thing only—the rateable value of the dwelling. No regard is paid to the amount of water consumed, to the number of persons in the household or

to the ability to pay. Unlike domestic rates, for which there is a rebate scheme to alleviate the burden of those on low incomes, there is no such provision for water rates. As a result, a family of half a dozen people with perhaps three of four incomes coming into the household will pay a water rate identical to that of the pensioner next door living alone. Given the relative consumption of these two households, it is likely that the pensioner is paying five or 10 times more for every gallon of water consumed.
No water rebate scheme exists because no such scheme is allowable under present legislation. The chairman of the Welsh water authority recently said that he would welcome greater flexibility to try to overcome this anomaly in the legislative framework within which he has to work. But a change to the Water Act 1973 is needed to accomplish this.
I was told by a Welsh Office Minister some time ago that section 30(5) of the 1973 Act is expressly designed to eliminate preference to any class of persons. It is on the basis of this section that water authorities have been advised that they cannot facilitate any such rebate scheme for pensioners and other persons on low incomes. It is therefore the intention of my Bill to amend section 30 of the Act. Together with consequential provisions, this will enable rebates to be paid to persons on low incomes in order to reduce the unfairness of the present system.
I should like to deal with two excuses sometimes made for not introducing a rebate scheme. First, it is said that there is an option for those living by themselves to have meters installed. This is a costly business and may involve expenditure of £35 or £40. Metered water is not free. The break-even point beyond which meters give a better deal for a couple receiving pension has been assessed as property of a rateable value in excess of £150. Metering is, of course, no solution for families on low incomes. Secondly, it is said that supplementary benefits can help those hard hit by water rates. In some cases, the benefits can help. I would advise anyone with problems with their water rates to ask the local DHSS office for assistance.
There are, however, three problems. First, the benefits are still insufficient to bridge the gap facing people who have been landed with enormous water bills and a weekly payment can also cause cash flow problems. Secondly, many people are caught in the poverty trap and miss supplementary entitlement although they undoubtedly need help with their water bills. Thirdly, there is the take-up of supplementary benefits particularly among elderly pensioners living alone.
I readily acknowledge that this is not the first attempt to introduce a Bill of this nature. A few weeks ago, the House gave a first reading to the Fuel Standing Charges (Exemption for Pensioners) Bill which overlaps part of the area covered by my Bill. The hon. Member for Stockport, North (Mr. Bennett) has introduced several Bills over the past five years to try to get a rebate scheme accepted. I raise the issue again for three reasons. First, there has been an enormous recent increase in water charges in Wales, amounting to 18·7 per cent. this year, a greater increase than the rise in income of most pensioners. Secondly, over the past couple of years, an increase in direct billing has caused much anxiety and distress. Thirdly, the Government are this year reorganising the water industry, and now would be an opportune time for this change also to be undertaken.
I therefore ask the House to give the Bill a First Reading, not because it is likely in itself to make much


progress in this Session but to show the Government the feeling within the House that legislation on this matter is required and in the hope that the Government will see fit in the next Session of Parliament to introduce legislation to achieve this aim.

Question put and agreed to.

Bill ordered to be brought in by Mr. Dafydd Wigley, Mr. Andrew F. Bennett, Mr. Lewis Carter-Jones, Mr. Alfred Dubs. Mr. Tom Ellis, Mr. Geraint Howells, Mr. Roy Hughes, Mr. D. E. Thomas and Mr. Gordon Wilson.

WATER RATES (PROVISION OF REBATES)

Mr. Dafydd Wigley: accordingly presented a Bill to amend the Water Act 1973 to allow water authorities to vary their scale of charges so as to distinguish between water rate imposition on single person households, pensioners and families on low incomes, and other categories of consumers; and for related purposes: and the same was read the First time; and ordered to be read a Second time upon Wednesday, 14 July and to be printed. [Bill 163.]

WAYS AND MEANS

NATIONAL INSURANCE SURCHARGE (LOCAL AUTHORITIES ETC.)

Motion made, and Question proposed,
That, notwithstanding the Resolution of 15th March, provision may be made for a different rate of surcharge under the National Insurance Surcharge Act 1976 in the case of certain contributions which ire required to be paid by—

(a) bodies which are local authorities of a description specified in that provision;
(b) the Receiver for the Metropolitan Police District and the police authority fox every police area other than that District;
(c) the fire authority for every area in Scotland falling within a combined area;
(d) probation and after-care committees; and
(e) magistrates courts committees and the committee of magistrates for the inner London area.—[Mr. Giles Shaw.]

The House divided: Ayes 219, Noes 176.

Division No. 268]
[3.40 pm


AYES


Adley, Robert
Farr, John


Alexander, Richard
Fell, Sir Anthony


Amery, Rt Hon Julian
Fenner, Mrs Peggy


Ancram, Michael
Finsberg, Geoffrey


Aspinwall, Jack
Fisher, Sir Nigel


Atkins, Rt Hon H. (S'thorne)
Fletcher-Cooke, Sir Charles


Atkins, Robert (Preston N)
Fookes, Miss Janet


Atkinson, David (B'm'th,E)
Forman, Nigel


Baker, Kenneth (St.M'bone)
Fowler, Rt Hon Norman


Baker, Nicholas (N Dorset)
Fox, Marcus


Banks, Robert
Fraser, Rt Hon Sir Hugh


Beaumont-Dark, Anthony
Fraser, Peter (South Angus)


Bendall, Vivian
Garel-Jones, Tristan


Bennett, Sir Frederic (T'bay)
Glyn, Dr Alan


Benyon, Thomas (A'don)
Goodlad, Alastair


Bevan, David Gilroy
Gow, Ian


Biffen, Rt Hon John
Greenway, Harry


Biggs-Davison, Sir John
Griffiths, E. (B'y St. Edm'ds)


Blackburn, John
Griffiths, Peter Portsm'th N)


Blaker, Peter
Gummer, John Selwyn


Boscawen, Hon Robert
Hamilton, Hon A.


Bottomley, Peter (W'wich W)
Hamilton, Michael (Salisbury)


Bowden, Andrew
Hampson, Dr Keith


Boyson, Dr Rhodes
Hannam, John


Braine, Sir Bernard
Haselhurst, Alan


Brinton, Tim
Hastings, Stephen


Brittan, Rt. Hon. Leon
Hawkins, Sir Paul


Brooke, Hon Peter
Hawksley, Warren


Brotherton, Michael
Hayhoe, Barney


Browne, John (Winchester)
Heath, Rt Hon Edward


Bruce-Gardyne, John
Heddle, John


Budgen, Nick
Heseltine, Rt Hon Michael


Burden, Sir Frederick
Higgins, Rt Hon Terence L.


Chalker, Mrs. Lynda
Hogg, Hon Douglas (Gr'th'm)


Channon, Rt. Hon. Paul
Holland, Philip (Carlton)


Chapman, Sydney
Hunt, David (Wirral)


Churchill, W. S.
Hunt, John (Ravensbourne)


Clark, Hon A. (Plym'th, S'n)
Irvine, Bryant Godman


Clark, Sir W. (Croydon S)
Irving, Charles (Cheltenham)


Clarke, Kenneth (Rushcliffe)
Jenkln, Rt Hon Patrick


Cockeram, Eric
Jessel, Toby


Cope, John
Johnson Smith, Sir Geoffrey


Cormack, Patrick
Jopling, Rt Hon Michael


Costain, Sir Albert
Kellett-Bowman, Mrs Elaine


Cranborne, Viscount
Kershaw, Sir Anthony


Douglas-Hamilton, Lord J.
Kimball, Sir Marcus


Dover, Denshore
King, Rt Hon Tom


Dunn, Robert (Dartford)
Knox, David


Durant, Tony
Lamont, Norman


Edwards, Rt Hon N. (P'broke)
Lang, Ian


Eggar, Tim
Latham, Michael


Elliott, Sir William
Lawrence, Ivan


Fairgrieve, Sir Russell
Lee, John


Faith, Mrs Sheila
Lester, Jim (Beeston)






Lewis, Kenneth (Rutland)
Scott, Nicholas


Lloyd, Ian (Havant &amp; W'loo)
Shaw, Giles (Pudsey)


Luce, Richard
Shelton, William (Streatham)


Macfarlane, Neil
Shepherd, Richard


MacGregor, John
Shersby, Michael


MacKay, John (Argyll)
Silvester, Fred


Macmillan, Rt Hon M.
Sims, Roger


McNair-Wilson, M. (N'bury)
Skeet, T. H. H.


Madel, David
Smith, Dudley


Major, John
Smith, Tim (Beaconsfield)


Marland, Paul
Speed, Keith


Marten, Rt Hon Neil
Spicer, Jim (West Dorset)


Mawby, Ray
Sproat, Iain


Mawhinney, Dr Brian
Squire, Robin


Maxwell-Hyslop, Robin
Stanbrook, Ivor


Mayhew, Patrick
Stanley, John


Mellor, David
Stevens, Martin


Miller, Hal (B'grove)
Stewart, A. (E Renfrewshire)


Mills, Sir Peter (West Devon)
Stewart, Ian (Hitchin)


Mitchell, David (Basingstoke)
Stokes, John


Moate, Roger
Stradling Thomas, J.


Montgomery, Fergus
Tapsell, Peter


Morris, M. (N'hampton S)
Taylor, Teddy (S'end E)


Morrison, Hon C. (Devizes)
Tebbit, Rt Hon Norman


Morrison, Hon P. (Chester)
Temple-Morris, Peter


Mudd, David
Thatcher, Rt Hon Mrs M.


Murphy, Christopher
Thompson, Donald


Myles, David
Thorne, Neil (Ilford South)


Needham, Richard
Thornton, Malcolm


Nelson, Anthony
Townend, John (Bridlington)


Neubert, Michael
Townsend, Cyril D, (B'heath)


Newton, Tony
Trippier, David


Nott, Rt Hon John
Trotter, Neville


Onslow, Cranley
van Straubenzee, Sir W.


Osborn, John
Vaughan, Dr Gerard


Page, John (Harrow, West)
Viggers, Peter


Parris, Matthew
Waddington, David


Patten, John (Oxford)
Wakeham, John


Pattie, Geoffrey
Waller, Gary


Pawsey, James
Walters, Dennis


Percival, Sir Ian
Ward, John


Peyton, Rt Hon John
Warren, Kenneth


Pink, R. Bonner
Watson, John


Pollock, Alexander
Wells, Bowen


Porter, Barry
Wheeler, John


Price, Sir David (Eastleigh)
Whitelaw, Rt Hon William


Raison, Rt Hon Timothy
Whitney, Raymond


Rathbone, Tim
Wickenden, Keith


Rees, Peter (Dover and Deal)
Wiggin, Jerry


Rees-Davies, W. R.
Wilkinson, John


Rhys Williams, Sir Brandon
Winterton, Nicholas


Ridley, Hon Nicholas
Wolfson, Mark


Ridsdale, Sir Julian
Young, Sir George (Acton)


Roberts, M. (Cardiff NW)



Roberts, Wyn (Conway)
Tellers for the Ayes:


Rossi, Hugh
Mr. Anthony Berry and


Rost, Peter
Mr. Carol Mather.


Rumbold, Mrs A. C. R.



NOES



Allaun, Frank
Campbell-Savours, Dale


Alton, David
Canavan, Dennis


Archer, Rt Hon Peter
Cant, R. B.


Atkinson, N.(H'gey,)
Carmichael, Neil


Bagier, Gordon A.T.
Carter-Jones, Lewis


Barnett, Guy (Greenwich)
Clark, Dr David (S Shields)


Barnett, Rt Hon Joel (H'wd)
Clarke, Thomas C'b'dge, A'rie


Beith, A. J.
Cocks, Rt Hon M. (B'stol S)


Benn, Rt Hon Tony
Cohen, Stanley


Bennett, Andrew (St'kp't N)
Coleman, Donald


Bidwell, Sydney
Cook, Robin F.


Bottomley, Rt Hon A.(M'b'ro)
Cowans, Harry


Bradley, Tom
Craigen, J. M. (G'gow, M'hill)


Brown, Hugh D. (Provan)
Crawshaw, Richard


Brown, R. C. (N'castle W)
Crowther, Stan


Buchan, Norman
Cryer, Bob

Question accordingly agreed to.

Orders of the Day — Finance Bill

As amended (in the Committee and in the Standing Committee), further considered.

Clause 30

SOCIAL SECURITY BENEFITS

Mr. Jim Lester: I beg to move amendment No. 57, in line 43 at end insert:
'but this section shall cease to have effect as from 22nd November 1982 unless on or before that date the five per cent. abatement of the adult rates of unemployment benefit, made under section 1 of the Social Security (No. 2) Act 1980, is made good.'.
I notice that since five of my hon. Friends and I tabled the amendment it has attracted support from other parts of the House. The names of 30 Liberal and Social Democratic Members have been added to it. It must be the first time that the Liberals and the Social Democrats have been in one place at one time on the same issue. They are welcome to join us.
That this is the third time that the House has debated the issue in one form or another demonstrates the anxiety of hon. Members on both sides of the House about it. It has become a House of Commons rather than a narrow party issue. I am sure that if it were presented on a free vote, it would be carried overwhelmingly. I am sad that the arguments that have so far been advanced by my right hon. and hon. Friends have not convinced the Government of the deep sincerity of some hon. Members on the issue. That is why we have tabled the amendment.
The issue will not be settled tonight by skilled Whipping, trips to the Lebanon or other means to secure a narrow Government majority. I must point out gently and kindly that the issue will not go away. The longer it is left, the harder it will be to settle. More extraneous issues will be introduced and it will become more difficult for the Government to honour their agreement that the reduction in unemployment benefit is not permanent.
I shall briefly spell out the difference between those who support the amendment and the Government. I shall try to be scrupulously fair, not give a raft of quotations and distil the central points. I shall first trace the relationship between the 5 per cent. abatement and the Social Security (No. 2) Act. I was a member of the Committee on that legislation.
The Bill, when introduced, was accepted as a blunt instrument to obtain immediate reductions in the social security budget and a cut in overall public spending. Despite misgivings, many hon. Members accepted a variety of unpalatable measures. There was no question but that the 5 per cent. abatement and the reasoning behind it was linked to advance deduction before proper taxation. It was an administrative argument that taxation of short-term benefits could not be introduced and that therefore the 5 per cent. abatement was in advance of that because the Government needed the money. The benefits may not be taxed before 1982, but it was argued that the national need

required a payment on account. The debates in Committee demonstrated that it was roughish justice, but we accepted the measure.
My right hon. Friend now the Secretary of State for Industry, for whom I have the highest regard, did not commit himself to an automatic restitution of the cut when taxation was introduced. He did so for invalidity benefit because, as he pointed out at the time, invalidity benefit is a long-term benefit and unemployment benefit is short-term. He never admitted that it was a deliberate act of policy permanently to reduce the level of unemployment benefit. He used words that are familiar to all hon. Members when faced with pressure to make a pledge two years ahead. He said:
I am not in a position to give any comparable undertaking on the other benefits. There the words we have used before apply—that we will look at the position at the time in the light of all the circumstances and determine the appropriate level of gross benefit to apply to those benefits when they become part of taxable income. I cannot go further than that.—[Official Report, Standing Committee B, 30 April 1980; c. 460.]
Does one require any further commitment? Since then, there have been two debates on the issue. There have been 13 speeches from Conservative Members, all of whom have urged the Government to restore the cut to take account of circumstances at the time. The Government now know that the yield from taxing benefits will be about £650 million. They can see the unexpected and unwelcome increase in the number of unemployed, many of whom remain so for a year before exhausting their benefit. The Government must be aware of the increased numbers of unemployed receiving supplementary benefit, which is the most expensive way of helping the unemployed. They must be aware of the political and moral implications and of the fact that there is no case for not restoring the cut in the year that taxation is introduced. It is beyond belief that the Government should draw the taxation line to catch the unemployed. If the line were moved, the 5 per cent. would be restored, the book could be closed, and we could concentrate on measures to deal with long-term unemployment and reviving the economy. The point at issue is where the line should be drawn. If matters are left as they are, we shall effectively double the amount of tax paid by an extremely vulnerable group. They may claim benefit only if they have a contribution record in work covering the year ahead. Those with savings of more than £2,500 may not claim supplementary benefit. Between 500,000 and 750,000 people are involved.
I sum up with the words of my hon. Friend the Minister for Social Security who, on 18 March, said:
My right hon. Friends on the Front Bench have promised to keep this matter under review. We have said that the abatement will not be a permament reduction. It is equally clear that the abatement cannot be made good now, but it will be made good. My right hon. Friends have the matter under review. At the right time it will be made good.—[Official Report, 18 March 1982; Vol. 20, c. 536.]
Now is the right time to make it good. There can only be one right time to restore the reduction—the year in which the tax has been introduced.
There is then the argument that we cannot afford £60 million, despite the tenfold yield that taxation has brought to the Treasury. To a simple man like me, it sounds an enormous sum, but colleagues who have been Treasury Ministers describe it as candle ends. That may be going too far the other way, but it is certainly not an impossible amount for the Chancellor to find. The Government argued that the yield of £525 million originally estimated


had been allocated to various other forms of social security benefit, but that cannot apply to the extra £120 million that has been found on the re-estimate.
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I have no doubt that others will make a variety of helpful suggestions about sources of revenue that will not involve extra taxes, increasing the public sector borrowing requirement, higher interest rates or defeating the Government's economic strategy. I offer one.
When my right hon. and learned Friend the Chancellor introduced his Budget on 9 March, he mentioned the possibility of a community work scheme. He suggested that the Manpower Services Commission and the Department of Employment should work out a scheme based on benefit-plus. I understand that that is now proceeding. He suggested that the Government would reach a decision later this summer. Although he did not spell out the exact sums that he had in mind in advance of seeking advice, he gave illustrative figures suggesting that a net additional expenditure of £150 million would be available. He further stated:
We should indeed be ready to back this kind of development on an even larger scale if the demand is there.
I submit that that scheme is unlikely to make any demands on the Chancellor's Budget in the current year, and that, even if it did, the amount would be nowhere near the £150 million that he was prepared to commit in the first place with the possibility of a further £150 million if the demand was there. Therefore, I cannot believe that it is impossible for my right hon. and learned Friend to find £60 million.
In opening the section on jobs and pay in his Budget Statement, my right hon. and learned Friend used the following very moving words:
To have millions of people at a time without work, many of them for long periods, is a tragic loss to any community. To be unable to find work is an affront to personal self-respect. This waste of human resources is today the misfortune of many societies besides our own. It is naturally a cause of deep concern to every Member of this House."—[Official Report, 9 March 1982; Vol. 19, c. 730–32.]
I could not have put it better myself. It is of such deep concern to us that we suggest that it should not be impossible for my right hon. and learned Friend to find £60 million.
There is then the moral and political argument. The Government must be seen to be scrupulously fair in their behaviour towards the unemployed, who could be described as the walking wounded of the economic battles to which all Conservative Members have turned their hands in trying to revive and restore the economy.
When unemployment is 3 million and rising, it cannot be the fault of those affected. It cannot be the fault of the people who are in overmanned industry or in the wrong part of the country. It is not the fault of the employees if a company is forced to close because of exchange rates or has perished because it cannot meet its overheads due to falling demand.
No Conservative Member could argue that when we fought the 1979 general election we expected or anticipated the present level of unemployment, either national or locally in our constituencies. This issue is particularly close to me, because when I was a junior Minister at the Department of Employment I visited unemployment benefit offices throughout the length and breadth of the country. I stood behind the counters and saw

the queues of people snaking through. They were good, decent British citizens waiting to sign on, often in premises that were not equipped to handle the numbers involved. That certain knowledge of my own eyes makes me feel strongly that the Government should take this matter in hand and restore the 5 per cent.
We must bear in mind that a high proportion of the people now out of work have become unemployed for the first time in their lives after many years of work. For the first time in their lives, they must face the challenge of finding fresh employment, perhaps retraining or moving away from where they live. That is challenge enough. If they are also short of money and have to worry about trying to balance an impossible budget, we are adding too much to their burdens.
Let us consider the cash amounts. From November, a single person will be able to claim £25 per week unemployment benefit and a married couple £40·45. Anyone who has more than £2,500 in savings cannot claim any addition to that. The restitution that we seek amounts to £1·10 for a single person and £1·75 for a married couple. That is less than the cost of a round of drinks in this place.
Can we really think only of the gross figures—the 3 million unemployed and the £60 million cost? Should we not consider the individual budgets involved? To be unemployed and looking for work costs money. Constituents have proved to me that they have written 50 or 60 letters in their search for a job. How can they afford the postage charges to send those letters? Telephone calls cost money. Bus fares cost money to go to the jobcentre and to parade around going to the various jobs that they may or may not get.
One has only to compare those sums with the amounts received by old-age pensioners to realise how minimal that income is. The £25 per week compares with £32·85 for a single pensioner and the £40·45 with £52·55 for married pensioners. Therefore, we are dealing with those at the bottom of the scale. They have no additional claim on supplementary benefit, because my arguments do not apply to such people. If unemployment benefit is raised, their supplemetary benefit falls, so they do not receive any more money. We are talking about the 500,000 or 750,000 unemployed who have no claim on supplementary benefit.
My final point is political. In voting on this matter today, Conservative Members have their last chance to restore the cut in the year in which the benefit has been taxed, because it came into taxation on 6 July this year. It is not beyond reason to believe that there may be a general election in 1983. We should be a very foolish party and Government if we were not prepared for a general election some time in that year. Whenever it comes, there is no question but that unemployment will be one of the key issues for which we shall have to answer.
It has been suggested that our action today is a test of our loyalty to the party. I do not believe that is the issue. None of my right hon. and hon. Friends who put their names to the amendment could in any way be regarded as disloyal to the party. Our loyalty is unquestioned, but we cannot have loyalty on command or demand. On such issues a case must be made and one must judge one's loyalty against a wider loyalty to one's constituents and, in this case, to those constituents who are unfortunate enough to be unemployed, because they have no one else to speak for them. We could argue that, although it is important to reduce interest rates, to make industry leaner


and fitter and to get our economy thriving again, the corollary must be that we are seen to treat our unemployed fairly.
Should there be an election before this matter is settled, how will each of us stand when we are defending the matter to our constituents? We can explain the reason for the increase in unemployment. It may be difficult, but we can sustain the argument. We can probably explain why the Government have removed earnings-related supplement. It is a long argument and I will not enter into it now, but that removal reduced the standards of many unemployed people by 11 per cent. We can explain why we introduced taxation on short-term benefits. Many hon. Members wished that. It is a major step forward that deals with the "Why work?" syndrome and enables the Chancellor to have an intelligent taxation policy by raising thresholds regardless of the source of income. We can explain all those matters, but it will be difficult.
What about the 5 per cent.? Can we really say to the electorate "It was not the Government's intention for it to be permanent although it is now in its third year"? Can we say "The Government have it under review and will restore it at the right time" and expect to be believed?

Mr. Robert Sheldon: The hon. Member for Beeston (Mr. Lester) said in his opening remarks that this is a House of Commons issue. Credit is due to him and to other determined Conservative Members for ensuring that it is a House of Commons issue, and the signatures of Members of all parties, including the Liberal Party and the SDP, have ensured that it will remain so. In the many debates that we have had on the subject, speaker after speaker has been in full agreement, until we have come to the Minister's reply. That happened in the debates on 18 March and on 26 April. Such all-party agreement is not uncommon when an effort is being made to extract money from the Treasury, but unity today is not as simple as that.
There have been charges of errors by Ministers, of misleading statements and even some accusations of deception. I do not make any such accusation, and I shall confine myself to three quotations. The first is from the Secretary of State for Industry, then the Secretary of State for Health and Social Services, who said on 15 April 1980:
There are benefits that ought to be taxed but are not. We propose that pending the introduction of proper taxation it would be right to go for an interim scheme providing for a limited uprating … next November.
The right hon. Member for Daventry (Mr. Prentice), then the Minister of State, said on the same day:
We have a rough and ready substitute to last until 1982, when we hope to bring in proper taxation."—[Official Report,15 April 1980; Vol. 982, c. 1034–1042.]
My third quotation is again from the present Secretary of State for Industry, who said on 30 April 1980:
The hon. Gentleman asked specifically about abated unemployment benefit. That will make no difference because as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
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With such clear statements it should not be necessary to indulge in the "Kremlinology" to which we have been subjected, such as "examining with care what was really intended", asking at what time of the day the speech was made and the subsequent explanations that were attempted. If we were to take account of such

considerations, even if they were true, there would be an end to debate as we know it and an end to the record in Hansard, which states clearly what has been said and which forms the basis of our continuing arguments and discussion. If an hon. Member wishes at any time to refute what appears in Hansard, the method by which that is done is known to all. The House accepts readily a personal statement and forgives readily those who make mistakes. However, that was not done and there should be no tampering with the record.
The Chancellor of the Exchequer, in an important speech to the Conservative Political Centre summer school at Cambridge on 3 July—he was talking about the future as he saw it—said:
I can make clear what I believe should be the heart of our approach. It is to continue in three main directions. First, and no one should doubt our determination in this, it is to tackle the root causes of the scourge of unemployment which weakens our economy and threatens to embitter our national life.
No one can deny that the House is beginning to realise the significance of such embitterment.
However, many of the unemployed are already embittered. At the time of the debate on the 5 per cent. abatement on 15 April 1980, there were 1,522,000 unemployed. Today there are 3,070,000 unemployed. What would it cost to relieve that embitterment? It would be £60 million out of the £650 million obtained from the taxation of benefits. If, without being partisan, I contrast that £60 million with the £750 million that is being provided in the Bill to the better off in concessions on capital transfer tax, capital gains tax and the higher levels of income tax, some may compare what we are doing for one section of the population—perhaps for good reasons that I do not wish to examine now—with what is being done for a much more hard-pressed part of the population that we have the honour to represent.
During the past two years the unemployed have lost the earnings-related supplement and the child addition, but the 5 per cent. abatement reduces the income of everyone who receives unemployment benefit. That is why so many believed that the abatement was harsh. If, as the Secretary of State said, the 5 per cent. was in lieu of taxation, those who did not pay tax had no tax advantage to offset against the loss of benefit. For them it was not rough justice; it was clear injustice.
Unfortunately, this is not the only indignity suffered by the unemployed. The taxation of the unemployed is harsher and more cruel than that devised by the Government for any other citizens. It still amazes me to read section 28 of the Finance Act 1981, which becomes operative this week. The House of Commons is rightly concerned about—indeed, solicitous of—the rights of the taxpayer, and, when dealing with the taxation of the unemployed, that section makes one almost rub ones eyes.
We are dealing with the poorest people in our midst. Under the legislation passed last year, the benefit officer notifies the unemployed person of the amount by which he is to be taxed. Section 28(1) states that after receiving notice in writing from the benefit officer the unemployed person,
may object to the notification by notice in writing given within sixty days after the date of issue of the notification.
If he does not object in that time, the section states that the
amount shall not be questioned in any appeal against any assessment in respect of income including that amount.


That applies to the poorest people in our society. If they do not or cannot obey the bureaucratic injunction to object to an assessment that is provided for them, the amount of tax is certain. It is irrevocable and has the force of law.
It is no use such a person protesting that an error was made, that he was ill or overwhelmed with difficulties at the time through being unemployed, that he was not experienced at putting pen to paper, that he did not retain all his pay slips, that he did not add them together, that he did not subtract the part of the tax year when he was unemployed, that he did not deduct the personal allowance or the married allowance, that he did not compute the rate of tax on the balance, or that he did not check it with the benefit officer's assessment within the 60 days allowed. If he has not done all those things, it is no use his going to the advice bureau of his Member of Parliament, because he will not be able to do anything to help. The right to appeal has been forgone and there is no chance to raise the matter again. Members of Parliament are powerless to help a constituent in that respect. That legislation was a grievous error, because it removed the rights of our unemployed constituents.
There will, of course, always be errors. Sir Lawrence Airey, the chairman of the Board of Inland Revenue, stated that 10 per cent. of Inland Revenue codings are wrong. That refers to work that is carried out by tax officials—people who are accustomed to operating in this area. The scheme starts this week, but those operating it do not have wide experience of tax matters. They deal with benefits, and have come fresh to these complicated and rather tiresome calculations.
About 6 million people a year, or about 120,000 each week, will be liable to tax on their unemployment benefit. If we take Sir Lawrence Airey's estimate of experienced tax officials making errors of 10 per cent., about 12,000 people will be wrongly assessed each week. If those people do not object, they will be compelled to pay, without the right of redress by their Members of Parliament. That is almost certain to be happening now, in the first week of the introduction of the new scheme. This legislation will embitter the nation.
The Government started their life believing that it was necessary to increase the incentive to work. At that time unemployment was about 1·5 million. It is now more than 3 million. All hon. Members know of constituents who have applied for hundreds of jobs and received only a handful of interviews, with no job at the end. We all know of companies that advertise a vacancy and are so overwhelmed by the response that no normal method of selection is possible. We are proceeding towards the alienation of an important part of the population.
We know the Government's priority. They have stated it again and again. It is to reduce inflation. Although that might mean increased unemployment, they hope that unemployment will eventually decrease. They believe that unemployment is an unfortunate consequence of their policies. If they believe that, these poor unfortunate constituents who are unemployed, not because of their inadequacies, but because of a wider national goal, should be helped. Through no fault of their own, but in response to a higher necessity, their average wage of £150 will drop to a little over £50. Apart from their wounded pride and the injury to the confidence, these people have

commitments to meet, such as mortgage repayments. They will suffer a collapse in their standard of living, which for many will never be restored.
I know that the Minister will point to some of the administrative problems. It is a favourite device used by all Governments to intimidate their Back Benchers. We have all seen it used. It was used in the context of the petrol duty.
The great advantage of the House of Commons is that it is sovereign. It is able to correct administrative errors. Hon. Members can do this by going into a Lobby against the wishes of the Government. There were much bigger problems with the petrol duty. How could one reimburse those who had paid tax on petrol? That was a formidable argument, but at the end of the day the House of Commons decided that there were other, more important, matters and a way was found to deal with the problem. Even as the Finance Bill proceedings come to an end, the House, with its sovereignty, can resurrect many of the clauses in a new shape.
We have the famous Rooker-Wise amendment. That fundamental change was accommodated by the Government of the day. The earnings rule is another example of a change. The hon. Member for Islington, South and Finsbury (Mr. Cunningham) was instrumental in obtaining a change in the earnings rule, again to the consternation of the Government. It is right that now and again the Administration should be given a reminder. As the hon. Member for Beeston said, these are House of Commons matters and the House of Commons should decide on them, even if they are awkward—in fact, particularly if they are awkward. A lesson needs to be learnt by Governments who are insufficiently responsive to attitudes that are not hopelessly expensive and can be accommodated within the broad strategy of the Government.
This is one of those instances. The hon. Member for Hornsey (Mr. Rossi), the Minister for Social Security, said that the abatement
will be made good … At the right time it will be made good."—[Official Report, 18 March 1982; Vol. 20, c. 536.]
The hon. Member for Beeston said that the issue would not go away, and we must therefore ask: when is the right time? The promise has been made and been reaffirmed in the last few months, so when is the right time? Will it be when the Government can claim a great economic success? Will it be when unemployment declines considerably? I believe that the right time is this week, now that the tax has begun and is impinging upon those whom we represent. The House of Commons should decide accordingly.

Mr. Richard Needham: I am sorry, for three reasons, that we are having to debate social security benefits again this afternoon. The first is that we are doing so without the support of my hon. Friend the Member for Bath (Mr. Patten) and my right hon. Friend the Member for Chesham and Amersham (Sir. I. Gilmour). We have a powerful team but we are without two of our strikers.
Secondly, I regret even more having to debate the matter in the presence of my hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe), as it falls upon him to give the Government's case. He must feel slightly like Uriah the Hittite:


David wrote a letter to Joab, and sent it by the hand of Uriah. And he wrote in the letter, saying, Set ye Uriah in the forefront of the hottest battle, and retire ye from him, that he may be smitten, and die.
Thirdly, and most of all, I regret that we have to debate the matter again when I genuinely believe that the Government would accept the case that we have already made.
I am beginning to doubt the Government's real reasons, and certainly the original case that they put forward. Whatever the Minister concerned—my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and my hon. Friend the Member for Hornsey (Mr. Rossi)—may or may mot have said, they did not at any time argue about the principle; they argued, as we have all said, about the restoration and the timing of that restoration. It is very important to me that they accepted the case.
The money comes out of the national insurance fund, which is a hypothecated fund. That means, if it means anything at all—I am beginning to doubt whether it does—that it is a fund separate from the Treasury. The Treasury has been playing along with this belief because it has been reducing the Consolidated Fund supplement. It is clear that people look on the contributions that they pay into the fund as payments that enable them to have a reasonable level of benefit in line with the increased contributions that they have had to make. For many of those people, that benefit is the last fall-back position, as my hon. Friend the Member for Beeston (Mr. Lester) said, between losing one job and finding another. They believe—wrongly, as it appears—that it is not something to be tampered with at the whim of some Treasury mandarin.
If the Treasury is to argue that the national insurance fund is no different from any part of public sector borrowing and no different from any part of public sector finance, why does it have £4 billion sitting in Treasury stocks in the fund? If it is nothing more or less than an extension of Government spending, why does not the Treasury say so? Then at least people will know.
If the Government continue to argue that they cannot pay the 5 per cent. out of the NIF, after they have increased the direct revenue into the Treasury by about £650 million, reduced the Consolidated Fund element, and abolished the earnings-related supplement, let us call off the whole charade.
If the national insurance fund is not an insurance fund of any sort, if payments into it are in no way related to benefit, and if they can be altered at the whim of Treasury Ministers, let us at least be honest with the public and say, "It is a pay-as-you-go scheme, it is just part of the taxation that you and your employers have to pay, and the Government can alter what goes in and out of it as they will". But as long as the Government maintain that it is a national insurance fund, and that contributions to it relate to benefits that come out of it, they must restore the 5 per cent.
If the Treasury is so worried about public sector borrowing or public spending, perhaps it should try to find ways of getting back some of the £1 billion which, apparently, is still outstanding as a result of the Civil Service dispute.
I do not, however, believe any longer that the Treasury's argument holds water or that the Treasury has the argument in its heart. I have a nagging suspicion that

the real reason for the Government's obduracy in regard to reinstatement of the abatement is that they believe that wage levels in the United Kingdom have to fall if unemployment is not to rise, and that benefit must fall with them. Sir John Hoskyns in The Times and Professor Minford and others have used the elegant phrase "clearing the labour markets". I was never quite sure whether the Chancellor of the Exchequer agreed with that concept.
Sometimes the Chancellor of the Exchequer—as in the quotation given by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon)—seems to have real concern, compassion and sympathy for the unemployed, but on other occasions his economic views make Bismark look like a wet. If it is the Treasury view that it is necessary to restore competitive labour costs, I suppose it can be argued that the level of benefit should correspondingly decline; at least, increases in benefit should not narrow the gap. In replying to the debate, the Minister may make the point that this year the level of benefits has increased at a higher rate than the level of earnings, but I ask the House to consider what has happened in the past five years and to take a rather longer look at the relationship between benefit and earnings.
In 1978, unemployment benefit rose by 7·1 per cent. and earnings rose by 13·3 per cent. In 1979, unemployment benefit rose by 17·5 per cent. and earnings rose by 19·1 per cent. In 1980, unemployment benefit rose by 11·6 per cent. and earnings rose by 18·9 per cent. In 1981, benefit rose by 9 per cent. and earnings rose by 11·3 per cent. In 1982, unemployment benefit rose by 11·1 per cent. and earnings rose by 9·5 per cent. So only in regard to the last year can it be argued that benefit has begun to creep back and narrow the gap between benefit and earnings.
What evidence is there for the argument expressed in the elegant words that labour markets "clear on price'"? Recently, I asked my hon. Friend the Member for Dorking (Mr. Wickenden) whether he would be prepared to move from Felixstowe to Liverpool if dockers in Liverpool were £20 cheaper than clockers in Felixstowe. He said that he did not think that that would be the incentive for which he was looking. I accept that there may be a price at which labour markets clear. Today in The Guardian there is a report that seamen from the "Canberra" are being laid off, to be replaced by Indian seamen from the Asian continent who are to earn £70 a month in comparison with the £120 a week earned by British seamen.
Are the Government really suggesting that we should try to put people back into work by cutting and continuing to cut the level of wages of those who are currently employed? Should we try to test the theory of the "Why work?" syndrome by reducing benefit? What would be the effect of forcing people at that level to find work? My hon. Friend the Member for Bridlington (Mr. Townend) feels strongly on that issue, but would he, as an employer, take on a married man with three children, at a wage on the margin of the poverty line? Does he believe that that employee will be a hard-working, reasonable and active member of his staff, or will he turn into the most radical militant unionist that he has? I should have thought that to try to reduce unemployment by clearing labour markets is not something that a Conservative Government should consider.
Furthermore, is it not right that it is usually the lowest paid who are sacked first, because it is they who are the ones who have the least skills and who are therefore very


often the least important? If there were this demand for labour at a lower price, surely it would be showing itself up somewhere in the vacancy figures. There is no evidence of that. It is interesting to note that, when Japanese companies invest in the United Kingdom, they always make it their first priority to pay more than other local United Kingdom employers.
I do not want to see a low-wage economy. I want a high-wage economy. I do not want to see a country employing millions of coolies who cannot find work except at the margins. It is not right, and it is not something that the Government should even think about.
Once we have disposed of the "Why work?" argument, there is another argument that is put forward, that about people who earn low wages. It is asked whether they will resent having to shell out of their contributions towards unemployment benefit for those who have lost their jobs. My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) made that point. That ignores the fact that people are entitled to unemployment benefit out of contributions that they have paid earlier. Further, as I have pointed out, the facts of the case do not bear that out.
I do not accept or believe for one moment that the ordinary people of this country who are in work, even in low-paid work, are so mean and small-minded that they are not prepared, even if they had to, to contribute out of their wages something towards those colleagues less fortunate than themselves who find themselves out of jobs.
I wish to quote from a speech made by the then hon. Member for Stockton-on-Tees—Mr. Harold Macmillan—in 1936, when the argument about contributions was being made in exactly the same sort of debate, with exactly the same arguments on both sides as we have today. He said:
Against that there is—and on balance in my mind I come down against the Government—"—
that has not changed much—
the undoubted fact, which was put forward by the right hon. Gentleman who spoke for the Official Opposition, that this contribution has become accepted by the men in employment, and that if you were to take, in any industrial area, a plebiscite of the men in or out of work, you would get a majority of men in work who would be prepared to continue to pay their penny, and to see a shilling, or whatever may be the additional benefit, go to their comrades who are out of work."—[Official Report, 8 April 1936; Vol. 310, c. 2830.]
I do not believe that there is an argument that, in this year, the first in which benefit has been increased more than wages for the first time, there is a groundswell of bad feeling among those in work against those people out of work. I do not accept the "Why work?" argument, I do not accept the argument about those on low earnings and I do not accept the third argument that is advanced by my right hon. and hon. Friends—that unemployment benefit levels determine basic wage demand. I do not see the connection. If one examines the relationship that I have described between unemployment benefit and increases in wages, one finds that the figures do not bear that theory out.
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Therefore, there is no basis to the argument that the money is not there. There is no basis to the argument that the low-paid will be resentful and there is no basis to the argument about wage settlements being dependent on unemployment benefit. The central argument is the

Government's supposed belief that, if we reduce the level of benefit, people will find their way back into work. That is a belief that rests on the free market and on the concept of labour markets finding their levels.
Another quotation from the then hon. Member for Stockton-on-Tees is relevant. In a debate on unemployment in 1932 he said:
There is a great deal to be said for the free market policy, but there is a great deal to be said against it. To my mind, the great objection to it is that you cannot attain it. To have a free market policy means a world free market. Who is going to get that? It means the abolition of tariffs and exchange restrictions; it means moreover—and let us face the fact—the abolition of trade union restrictions, of insurance schemes, of social services. It means the right of private enterprise to compete, by reducing all costs—and after all social service costs are just as important as wage costs—down to the basis of the very lowest competitor. That is the true free market policy. Is there any party in the House prepared to go ahead and seek to win support from the electors on that policy?"—[Official Report, 4 November 1932; Vol. 269, c. 2203.]
It may be unfashionable to be a Tory in the Tory Party at the moment, but the welfare of the unemployed and their families is not something that I and many of my hon. Friends are prepared to see diminished. If my hon. Friends on the Front Bench are not prepared to give in to us today on this issue, we shall return to it and we shall return to it again and again because it is the basis of Tory Party philosophy that we help those who cannot help themselves.

Mr. J. W. Rooker: It is a privilege to follow the speech of the hon. Member for Chippenham (Mr. Needham). I speak as one of the signatories to the amendment, although because of the quirks of Commons procedure it is only the signatures that are added on the day before the debate that appear on the Order Paper. It is not by accident that the SDP signed this amendment last night. I hope that all its members will vote for the amendment because, of the members of that party who signed this amendment, 18 were missing on 18 March when the Government came close to defeat on this issue. I hope, as all except one member of the SDP has signed the amendment, that they will all be here to vote.
The hon. Member for Beeston (Mr. Lester) said that this was a House of Commons matter, and he was right to make that point. Many quotes will fly around the House today and among them there will be some from the Tory Party manifesto. I wish to remind the House, because I agree with the hon. Member for Beeston, of what is said on page 21 of the manifesto about the supremacy of Parliament:
We will see that Parliament and no other body stands at the centre of the nation's life and decisions, and we will seek to make it effective in its job of controlling the Executive.
There was never a more opportune moment for Parliament to seek to control the Executive than by a vote in favour of amendment No. 57 tonight. That will put reality on those words, with all of which I and any other parliamentarian would agree. There can be no argument across the Floor of the House on that.
We had two separate debates on this subject earlier in the year, which were different in some respects. Some hon. Members used statistical arguments to try to convince the Government, but the Government know that they cannot win on that argument. Hon. Members raised the issue of the morality of Government giving promises, in whatever words they are spelt out at whatever time in the morning, that are not kept. That did not have much effect


on the Ministers. I do not feel sorry for them. We are pleased to see the Ministers from the Department of Health and Social Security today. That Department was responsible for the original legislation. The Government were forced to promise in 1980, both to Conservative Members and Opposition Members, that the 5 per cent. reduction in unemployment benefit was an interim measure in lieu of proper taxation. No one can argue that we shall not have proper taxation from this month.
I want to raise three or four salient points that show that the Government are not being as moral as they should be in the way they handle this issue, and to point out how unemployed people have been treated by the Government. That is what this debate is about.
This is the first of the five benefits that were cut by 5 per cent. that has become taxable. None of the others has been caught by the tax system yet. We shall have to wait for each one to become taxable to see whether the Government keep their promise. All the benefits are included—sickness benefit, injury benefit, maternity allowance and invalidity pension. The last benefit is the most unfair because there is no sign of it being taxed, and it is grossly unfair to people who have lost 5 per cent.
I want to raise the point about how the Financial Secretary deals with the matter. He is the Minister—although one would not realise it today—who has answered letters to the Treasury on that issue. He is also answering letters that have been sent by hon. Members to the Secretary of State for Social Services. He has a standard letter in which he points out:
It has long been accepted by successive Governments that there is a strong case in principle for taxing unemployment and social security benefits of an income nature.
In the first year of the national insurance scheme in 1948 benefits were taxable. It turned out to be administratively impossible to continue the system and it was dropped. The letter continues:
We have received a number of inquiries on this subject"—
I bet they have—
so I have prepared a summary—in question and answer form—of the questions most commonly raised.
He suggests that the letter he sent to the constituent, as it gives the Government's view. A two-page question and answer form is attached. It asks for example:
Why is the Government making benefits paid to the unemployed taxable?
The answer mentions the principle but not the fact that benefits were cut by 5 per cent. in lieu of tax.
I consider that question and answer exercise conducted by the Treasury, which hon. Members who inquire are asked to feed to their constituents for whom they have made representations, as utterly dishonest. There is no mention of the groundwork laid for two years to bring benefit into tax by cutting such benefit in lieu of proper taxation. That is pretty disgraceful conduct. It is as if the Treasury is ashamed of what it is doing, and rightly so in my opinion. The problem with legislation that is rushed through, as was the Social Security (No. 2) Act 1980 by means of a guillotine announced the day after the Budget, is that such matters are not properly debated. The public did not appreciate the content of the Act until they lost earnings-related supplement. Hon. Members still receive letters asking why earnings-related supplement is not paid. We explain that the matter was dealt with in Parliament two years ago.
I turn to the Department of Employment and the June edition of Employment News. It contains a centre page spread on the taxation of benefits. The article says:
It is only fair, says the Chancellor
that we should tax these benefits. There is no mention that the benefits were cut by 5 per cent. The article continues:
It is not a new idea. Sir Geoffrey Howe, Chancellor of the Exchequer, reminded the House of Commons in 1980.
There is then the usual twaddle about successive Governments. I do not deny that successive Governments have wanted to bring all forms of income into the taxable net if it can be done. There is no argument about that. But there is no mention of the 5 per cent. cut in the centre page spread of the DoE Employment News. That article is not fair.
Today is 13 July, which is the third anniversary of the Inland Revenue's raid on the offices of Rossminster. During that three years, hardly any action has taken place. Hundreds of millions of pounds could be lost to the Revenue. However, during those three years, the Government have managed to find time to cut unemployment and other benefits by 5 per cent. and to legislate to tax unemployment benefit without restoring the 5 per cent. The Government have found time to take some actions but not others as the anniversaries roll by. Those members of the public who note what has been said and done in the House will realise what the Government's priority is in their treatment of unemployed people. As many hon. Members have mentioned, there has been an increase in the number of unemployed people. Those hon. Members who have done the calculations know that during the first three years that the Government have been in office one person has joined the dole queue every minute. That is what we are debating.
I disagree with the hon. Member for Chippenham, who gave the impression that unemployment benefit was racing ahead of earnings or the rate of inflation. A 5 per cent. cut in unemployment benefit might seem a relatively small amount. Benefits to unemployed people have been cut or abolished. I want to give the House a statistic that reinforces the argument for putting back the 5 per cent. That 5 per cent. is only a small part of the loss that unemployed people have suffered under the Government. There are arguments for putting back the other cuts, but we are not debating them today. A man's average earnings, according to official figures, are £160 a week. My constituents do not believe that figure. Therefore, a man with average earnings, with a wife who is not earning and two children—the average family—becoming unemployed after 22 November this year—the date of the annual increase in social security benefit mentioned in the amendment—will receive £41·05 a week. Flat rate unemployment benefit for the man will be £25 a week, for his wife £15·45 and 60p a week for the children. If none of the changes relating to unemployment benefit—the 5 per cent., the earnings-related supplement, tax refunds and the fiddling of the child dependency—had been made by the Government, the same man earning the same wages would have received £79·50 a week. He would have been paid that the week after he lost his job. He is therefore taking a big drop. His unemployment benefit would have been £26·10—putting back the 5 per cent. for the single person. The wife, instead of receiving £15·45, would receive £16·10.
The increase to the two children under the national insurance scheme, as it was when the Government took


office, would have been £4·60. The formula for dependants has been changed. He would have received £18·60 in earnings-related supplement. That has gone. He would have received a tax refund of £14·10 a week, on the assumption that he would have been unemployed from November until the end of the tax year. The House will not want me to go into detail, but I am prepared to publish any of the assumptions. The Library answered my questions.
Let us compare the profile of a two-child family whose wage earner became unemployed after 22 November with what it would have been had none of the changes affecting the unemployed taken place, including the 5 per cent. For the man on average earnings the income will drop to £41·05 from £79·50. That is half. We are asking for only a small part of the massive gap to be closed. We are asking for only a few quid out of the £38·45 difference.
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Supplementary benefits are not included in the figures. If a man has savings or redundancy payments of over £2,500, supplementary benefit does not come into it. Surely we cannot tell a man on £41 a week who does not have that sum to go on supplementary benefit. Do we tell all the unemployed to go straight on to the means test the first day on the dole? That is the consequence of the Government's action.
We are talking about a person on average earnings, whose family will take a catastrophic drop in income, anyway. They will lose half their income, and all we are asking for is to have the 5 per cent. back. It is £2 or £3 a week. The Government will get 10 times as much tax from taxing the benefit as it would cost to put back that few pounds a week. Why in heaven's name can they not do it?

Mr. Kenneth Lewis: I have some sympathy with the Minister who is to reply. But there is safety in numbers; various Ministers have previously dealt with various points on this subject. Representing, as he does, the Treasury, he is a mountebank. A few months ago the Treasury found a fortune that it did not know it had—£2 billion. It had made a mistake in the right direction. Consequently, in relation to that we are arguing for petty cash. My hon. Friend the Minister of State is now joined by the Financial Secretary, who I hope will also use his influence. I am sorry that my right hon. and learned Friend the Chancellor of the Exchequer is not here. This is an important debate on a matter that worries the country and the House.
I shall not give financial statistics. My hon. Friends the Members for Beeston (Mr. Lester) and Chippenham (Mr. Needham) dealt with the details. Indeed, we have had them in every debate, including in Committee, and I have read some of the proceedings. My argument is simple. The Government say that they recognise the case for putting back the 5 per cent. They must therefore have considered the finances. We do not have to convince them about that.
The Government may say that they did not give a firm promise. An oil magnate once boasted about his position until it was pointed out that sardines were also in oil, but they were not clever because they left the key on the outside of the tin. The Treasury and the DHSS have done the same. They offered the key, and that has led to the debate. They have said that the Government will do something. There are promises and promises. We know

that in Parliament when dealing with Ministers of whatever Government. But the Government cannot gainsay the fact that there was, to say the least, definitely a nod and a wink—"Do not worry. It will be all right. We shall get round to it." They may not have given a firm "Yes" or a date, but they said that in due time they would tell us that the 5 per cent. was being put back.
I shall not vote unless we are given a clear date early next year. Let us have no pussyfooting. We want the change in this tax year. It will not be a full financial year—no more than one quarter—so it will not cost the Government much this year.
In our debate in March the Minister said that the abatement would not be a permanent reduction; it was related to taxation of benefits. I wanted the previous Conservative Government to tax unemployment benefit. There might have been an argument against cutting fully the wage-related unemployment benefit, but most of us went along with it. When the Government introduced the 5 per cent. cut, had we understood that it was an actual cut and not just to make room for taxing unemployment benefit we would not have accepted it. We believed that it was temporary, because that was what we were told. The Government still say that it is temporary, but what is temporary?
Unemployment is here to stay. It will not greatly decrease in the next two years. A large section of the population will not easily find jobs. It is argued that unemployment benefit should not be too high compared with the lower rates of wages, but we are not talking about people with large families on higher benefits. Those most affected will be getting about £38 a week. Many will be on this benefit for a long time. Even if they are doing their best and are prepared to travel, they will not find jobs.
There are extraordinary new definitions about politicians of both parties. For example, there has been an attempt to split the Conservatives into wets and dries. I do not know what those of us in the middle are—perhaps somewhat dripping damp. When the wets speak at a meeting of wets they to try go a little to the right—just to get the balance correct. With the dries, it is the opposite way.
My right hon. Friend the Secretary of State for Employment spoke recently at a Primrose League meeting. He has a reputation for being somewhat dry. At that meeting, in the presence of my hon. Friend the Member for Halesowen and Stourbridge (Mr. Stokes), who has a reputation for being equally dry, my right hon. Friend made a number of wet remarks. That is a great advance. He is beginning to move from the right into the middle. He said that there was no likelihood of getting unemployment down, particularly among young people, to any great extent before the next general election. So he was not making an electioneering speech. He said that he had hopes, once the general election was over. So have I. He then went on to say:
But something has to be done in the meantime to ease the problems of this period of transition.
One cannot be more moderate than that, and that is exactly where I and many of my right hon. and hon. Friends on the Back Benches stand. We want the Government to recognise that the period of transition should be eased. The Government have already said that they intend to do that. When will that be? If they are not careful, they will find themselves in a difficult position. The general election is approaching. If they deal with the


5 per cent. near that time, people will say "They have done it only to buy votes in the general election." We do not want that to happen. We want the Government to deal with the problem because they recognise the need to do so.
We are told that the Government—we are told this about all Governments—might lose face if they were to concede tonight. We are told that if the Minister announces at the Dispatch Box that he is prepared to grant the concession that I and my hon. Friends would like, the Government will lose credibility. I have been in this House a long time—some might say too long—and I have seen many Governments. I have known occasions—they occur in almost every Parliament—when Governments or Ministers—sometimes even Prime Ministers—have to concede to the will of the House of Commons. That is good for democracy, it is good for them, and, on the occasions when I have seen it happen, it has almost always proved to be right. We should avoid having a dictatorship for the term of a Parliament, with the Whips arranging everything and the Government making no concessions.
This may be a minor matter, but it is important for the country, and it is particularly important for the low-paid unemployed. Therefore, I ask the Government to accept the will of the House of Commons. It will do the Government a power of good, it will do democracy a power of good, and it will avoid much embarrassment later for the Government.

Mr. John Golding: The hon. Member for Beeston (Mr. Lester) took over my job at the Department of Employment after the election. I thought then, and I still do, that it was a change for the worse. However, every cloud has its silver lining, and the silver lining here was that at least one Conservative Member of Parliament went around the country to see the tragedy of unemployment.
When I was at the Department of Employment I, too, travelled the country, talking to the unemployed, visiting unemployment benefit offices and looking at the queues. However, the characteristics of the queues were different before May 1979, and the differences are important to this debate.
First, the people in the queue today have less money in their pockets in redundancy payments from their firms. Before 1979, workers had a great desire to draw redundancy benefits because they thought that it would be easy to get jobs after they had been paid off. Employers were often only too willing to pay substantial sums. Those substantial sums are less today, so the unemployed in the queue have less in their pockets.
Secondly, those in the queue would, on average, have been there for fewer weeks, months or years than is the case now. As the period of unemployment gets longer, so people's poverty gets deeper. I would not campaign or give up one weekend's fishing to try to get rid of unemployment for, say, two weeks in a year. Short-term unemployment is no great traumatic experience. Long-term unemployment is very different. Part of the trauma of long-term unemployment is the growing burden of poverty that the unemployed have to carry. So the fact that, before 1979, the number of weeks, months or years was that much shorter is important.
The money in the pockets of the unemployed would have been substantially more, partly because of the presence of wage-related benefits. Those benefits were

introduced to make it possible for craftsmen, in particular, to retain their pride and sense of status during periods of unemployment. I well remember the argument at the Labour Party conference over the abandonment of the principle of equality in benefits—a principle to which the Labour Party had been wedded. Wage-related benefits were introduced because it was realised that craftsmen, particularly in the Midlands, wanted a social security scheme which gave them unemployment benefits very much nearer to their incomes than could be provided by a flat-rate benefit. Before 1979 the people on the dole queue had wage-related benefits in their pockets. Today, they do not.
I could have referred to the fact that before 1979 more would have qualified for supplementary benefit and that benefits were not taxed, but my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) eloquently spelt out the gap between what was paid to the unemployed under a Labour Government and what is being paid today.
I do not pretend that those in the group to whom the 5 per cent. cut is being applied are the worst hit. The people for whom I feel most sorry are those who have exhausted unemployment benefit. There are over 1 million people who have been unemployed for over a year and who are not entitled to any unemployment benefit. If their wives work, they are not entitled to any benefit at all. They have no income and are dependent upon their wives.
I turn to those who are drawing benefits—£22·50 now, £25 in November. Another difference between now and 1979 is that in areas like mine working people's savings are falling. Before people become unemployed, their overtime may have been cut. That may not be a bad thing, but what is bad as the probability that they were on prolonged short-time working before they were declared redundant. How do such people finance long-term short-time working from their savings? The average savings of working people are slight. They cannot withstand a year on short-time working.
I visited a friend in Newcastle-under-Lyme in the middle of a period of his short-time working and looked at his pay slip. He is a skilled engineer, yet he was earning about £40 a week. That is what he was paid for going to work. I found what I knew anyway, which is that the only way that such families can survive is to draw on their savings.
With the growing incidence of short-time working, that has been the general situation in North Staffordshire since the general election. It was partly cushioned by the part-time working compensation scheme, which the Government have now cut. Earnings have collapsed and savings have diminished. When unemployment comes there are just not sufficient savings to fall back on.
Hon. Members should put themselves in the position of an unemployed man with a family, whose savings have gone. They will receive £40.45. I do not like being too personal in the House, but I must ask Conservative Members to consider the situation of a man with his savings gone being told, as a result of something for which he is not responsible, that his income will be £40.45—a quarter of the national average earnings.
That must be an appalling prospect to any Conservative Member and, to be fair, to any Labour Member too. For working people with pride who want to work, have worked and who get their status from work, it is a devastating experience, which we cannot tolerate. It is distressing that people should have to come to my advice bureaux with gas


and electricity bills which they cannot pay. They ask how they can afford a suit to go for an interview for a new job. One sits there ashamed of society, because they cannot be given a decent answer.
It is against that background that we are talking about the Government taking away £1.5 from the single person and £1.70 from a married couple.
I put in a special plea for the young. I am not talking about the 16 to 17-year-olds for whom the Government are doing their level best in the new training scheme. However, let us consider the youngster who was unemployed when I was in the Department of Employment. Perhaps all that he has had since then is six months on a YOP scheme, which we were proud to introduce and which I shall continue to defend. That youngster now will be 20 or 21 years of age. He will never have earned any money. If he had worked and qualified—which he has not—the most that he would get—which he does not, because he is not entitled to it—is £25 a week unemployment benefit.
How are such youngsters to have any start in life at all? At least adults often have their own houses and furniture. How will such young people be able to get married? The situation arises of a youngster who has never worked, cannot get work, and who, at the age of 20, having fallen in love with a girl who is earning £30 to £40 a week, is not eligible for any benefit at all. He has nothing whatever with which to marry and contribute to a family. That is disgraceful.

Sir William Clark: He should not get married.

Mr. Rooker: The vice chairman of the Tory Party says that such a person should not get married.

Sir William Clark: The hon. Gentleman should get his facts right. I am not the vice chairman of the Conservative Party.

Mr. Golding: If the hon. Gentleman did say that such youngsters should not get married, what has happened to Toryism? What has happened to our one nation? Is it to be a condition of getting married that one must have the good fortune to have a wealthy parent and to live in an area where work is available?
The hon. Member for Beeston can bear me out when I say that there are estates in Liverpool and areas throughout the country where decent youngsters who desperately want work cannot get it because there is no work to do. If the Tories say that in those circumstances our youngsters should not get married, I must say that that is an abhorrent—

Sir William Clark: I should like to—

Mr. Jack Straw: Did the hon. Gentleman say that they should not get married?

Sir William Clark: I did not get married until I could afford to do so and it is legitimate for me to say that if a person is taking on the responsibility of marriage he should be able to afford to get married before thinking that the State should enable him to marry.

Mr. Golding: The burden of my remarks was not that people should get married before they can afford to do so.
But rules should not make it impossible for thousands of young people to be able to afford to get married. The least that we must do is to change the rules so that the long-term unemployed are entitled to a benefit as of right.

Mr. Robert C. Brown: My hon. Friend should not be surprised at anything that the hon. Member for Croydon, South (Sir W. Clark) says, because if the hon. Gentleman had had his way we would not be having the debate. He objected to the selection of the amendment and tried to prevent the debate from taking place.

Mr. Golding: One of the reasons why I entered politics was that I believed that working people in the 1930s were not given a square deal and were not allowed to maintain their pride or to live in dignity. I have always been conscious of the need to have the highest possible benefits, as of right, for those who, through no fault of their own, have no income.
The first case that I fought was that of my mother against what is now the Supplementary Benefits Commission. We should not tolerate a society in which people who want to work, but do not have the opportunity to do so, have to go to the SBC or any other commission to ask for handouts. They should receive the benefits for which they have paid.
Working people have paid for the 5 per cent. and they believe that they are being cheated out of it. If the Government persist in their actions there will be tremendous resentment among those who cannot speak for themselves in the House.

Mr. Bob Dunn: This has been a debate of great sincerity, with telling speeches having been made by my hon. Friends the Members for Beeston (Mr. Lester), Chippenham (Mr. Needham) and Rutland and Stamford (Mr. Lewis) and by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon).
I am the rose among the thorns because I shall vote for the Government. The debate has centred on a vexed question and my hon. Friend the Member for Beeston argued with great competence and sincerity that the 5 per cent. abatement should be withdrawn. We have become used in the House to the vision of hon. Members petitioning in their own way for changes to take place or not to take place. On this occasion hon. Members are petitioning for a restoration of what was changed.
The issue raises more points than it answers in the short term. My hon. Friend the Member for Beeston referred indirectly and briefly to the "Why work?" syndrome and my hon. Friend the Member for Chippenham outlined his views on that problem. The syndrome is a manifestation to which our attention hs been drawn on many occasions by my hon. Friend the Member for Norfolk, North (Mr. Howell) and it needs to be examined.
It can be argued that the restoration of the 5 per cent. abatement will contribute to reinforcing the problem facing the man who is financially better off by being unemployed. Let me outline the problem facing one of my constituents who works in a London retail shop, receives low pay and faces an annual bill of about £500 for British Rail travel—money which must be found from net income. How can he be expected to behave when faced with the choice of staying at home and being financially better off or working in London and being worse off?
We have heard nothing from any hon. Member about how the "Why work?" syndrome and the problems associated with it can be solved. The restoration of the 5 per cent. abatement will indeed close a book, as suggested by my hon. Friend the Member for Beeston, but it will not provide a solution to the problems associated with the "Why work?" syndrome.

Mr. Straw: Is that it? Is that the defence of the Government?

Mr. Clement Freud: The debate has been interesting, in that we have had nine speeches from the heart supporting an amendment which it is indefensible to oppose. We have now heard a speech read with a very small amount of verve by the hon. Member for Dartford (Mr. Dunn), and they are the only words that we have heard in support of the Government.
What the hon. Member for Beeston (Mr. Lester) said was right and what those who support his amendment have said was equally right. One juggles with the advisability of saying it again, saying it more loudly or saying it with a regional accent. The fact is that this is a proper amendment and the House is absolutely right to say that in this instance the Government are wrong and they must listen to the majority.
Dante, who was before my time, said:
The hottest place in Hell is reserved for those who remain silent on a moral issue.
I put it to Conservative Members that remaining silent on a moral issue does not simply mean abstaining. The place in Hell is also earmarked for those who follow the weasel words of the Whips, shuffling through the Lobby without thinking what they are doing.
Liberal Members and our colleagues in the SDP support a tax credit scheme and therefore do not object to the principle of bringing benefits into taxation. However, we do object to midnight raids on the poorly stocked benefits larder and the surreptitious clawing back of small amounts, in the hope that no one will notice.
It is easy for us to oppose, because we are in the business of opposition. It is what the Opposition are here for, just as it was when those sitting on the Conservative Benches were on this side. We are paid to say no to whatever the Government propose.
I wish to pay tribute from the Opposition Benches to those on the Government side who manifest the courage of their convictions, to those who have the decency to say that the needs of their constitutionts are more important than the political ambitions of those of their colleagues who sit on the Front Bench. We shall watch those who vote for what is a proper amendment and we shall see who abstains. We shall salute all those who do what we would consider to be the honourable thing.

Mr. Patrick Cormack: When the hon. Member for Birmingham, Perry Barr (Mr. Rooker) was speaking, I could not help but think, "Lawson! thou shouldst be living at this hour." I thought that because the Rooker-Wise amendment, which is so frequently quoted, would never have got on to the statute book had it not been for that happy marriage of sensitivity and expediency. My right hon. Friend the Member for Blaby (Mr. Lawson), the Secretary of State for Energy, was the sensitive one. If only he could be here now I am sure that the amendment would be passed tonight.
What saddens me is that the debate is being held at all. I congratulate my hon. Friend the Member for Beeston

(Mr. Lester) on what I considered to be a cogent and moving speech. I thought that my hon. Friends the Members for Chippenham (Mr. Needham) and for Rutland and Stamford (Mr. Lewis) made admirable contributions. It is distressing that the Government have placed some of their most loyal supporters in the position of having to table the amendment.
In a debate on 18 March some of us felt obliged to go into the Lobby against our own side. We did not want to do that but we thought it was necessary to demonstrate resolve. We received a reply from my hon. Friend the Minister for Social Security which indicated that, yes, the Government had seen our point and that, yes, the time would come. I fondly expected that the time would come about now.
When we had that debate in April we were in the middle of a grave crisis and a number of us deliberately and consciously did not vote against the Government because we felt that it was wrong to do so at that time. We also felt that we had better give a few more weeks for the implicit pledge of my hon. Friend the Member for Hornsey (Mr. Rossi) to come to pass. It grieves me enormously that we need to have this debate today, and that my hon. Friend the Member for Chippenham and I and many others have felt obliged to table the amendment.
We are asking for very little for all too many people. They are the victims of the recession and the casualties of the quest for efficiency. The Government knew, when they pursued certain policies, that there would be casualties. Most of the people who are out of work are out of work through absolutely no fault of their own. There was a time, when I first came to the House 12 years ago, when a Member could say that a significant proportion of the unemployed were unemployed because they wanted to be so. At that time, there was more than a grain of truth in that. There is very little truth in it today.
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In my constituency in the West Midlands, which has been so devastated and which is the heartland of our industrial greatness and must be the cradle of any resurgence from the recession, thousands upon thousands of good working men and women are without hope and must be given hope. The two categories that particularly distress me are those in their early 50s who feel that they will never find another job, and those young people coming out of school many of whom, if they do not have the opportunity to work within two or three years, will adopt the attitude "Is it worth it? Is there any chance?" Some of them will not want to work. That would be a destructive and cancerous feeling in our society, if it were to develop.
What help have we given those people, our constituents, who are out of work through no fault of their own? I pay tribute to the new training initiative for the young. I wonder sometimes "Training for what?" We must give a great deal more thought to that, but I pay tribute to what has been done.
But when we come to the other categories, is the ceiling of £2,500, which was bumped up by £500 in the Budget, really the encouragement that one expects from a party that has always believed in encouraging saving and thrift, virtues of which my right hon. Friend the Prime Minister has so proudly boasted in the past, from which she has


benefited and which she sought to inculcate in other people? Is it much help when we say "£2,500 and we cut you off"? What about the abatement?
When it was said that unemployment benefit would be taxed—I, like my hon. Friend the Member for Rutland and Stamford, agree with the taxing of benefits; I do not believe that it is wrong—there was an implicit undertaking in a number of speeches that we would deal with the 5 per cent. We have a moral commitment to do so. It is tragic that we must plead with the Government to change their mind. As Members of Parliament, we know, perhaps more than any other group, what it is to be insecure in a job. There are Members on the Government Front Bench who had to travel from constituency to constituency seeking to get themselves adopted as candidates, wondering whether they would find jobs. They should have a fellow feeling and sympathy with those in the dole queues. I believe that they have, I trust that they have and I only wish that they would translate that sympathy into action by accepting the amendment.
To me, the Tory Party means many things but it means at home a real concern for the disadvantaged. It means a real determination to do for others as one would be done by and to ensure that people who through no fault of their own are in real trouble are helped. We are not suggesting that largesse be heaped from the Treasury and that the fires of inflation be stoked. All we suggest in the amendment is that some modest restitution should be made; it is restitution that we are discussing. The hard Gradgrind image is not the image of the Tory Party as I know it and believe in it.
Mr. Gradgrind talked about facts. The facts that face Britain in 1982 are that 3 million people are unemployed, that 1 million have been unemployed for a year or more and that we in the House of Commons today have the opportunity for a small cost in comparison with the sums that have rightly been spent recently on grave national endeavours to restore what we promised would be restored. I believe that it was a promise, I believe that it was a pledge and I believe that it is a pledge that should be honoured.
I hope that we will have a sympathetic and sensitive reply from my hon. Friend the Minister of State. It is no criticism of him to say that the Chancellor of the Exchequer should have been here to listen to the arguments and to answer the debate. This is a significant issue. It is the third time that the House of Commons has debated it and the Chancellor should have been here to answer. I regret that he is not. The reason, I hope, is that he has given my hon. Friend a message. I hope the message reads: "We accept the logic of your arguments. We accept the equity of your cause. We shall accept what you say."
The debate could be shortened if my hon. Friend was now to go to the Dispatch Box and say just that. That is all we want—no more and no less. If we get it, we shall all rejoice and remain totally united. If we do not get it, some of us will be moved, as my hon. Friend the Member for Croydon, South (Sir W. Clark) was moved time after time on the Northern Ireland Bill, to vote against our party.
I shall take lectures from no one on loyalty. What I am doing tonight is certainly no worse than voting against the guillotine on the Northern Ireland Bill. My right hon. and hon. Friends know in their hearts that, if there was a free

vote on this issue, there would be no question of the result. I urge them for once to put this matter first, to say that they will vote for the amendment supported by their hon. Friends, to restore some traditional Toryism to the Conservative Party in the Lobby and to ensure that those who are least able to look after themselves are looked after by us in the House.

Mr. David Ennals: The hon. Member for Staffordshire, South-West (Mr. Cormack) is my pair. I want to make it clear that we are not paired tonight. It is with some pleasure that I shall accompany the hon. Gentleman through the same Division Lobby. This is probably the most important debate in our discussion of new clauses and amendments to the Finance Bill. I agree profoundly with the hon. Gentleman that the Chancellor of the Exchequer should have been present.
I intend to concentrate on the narrow issue before the House. There has been only one contribution lasting 1½ minutes, if I do not exaggerate, in support of the Government's position. The hon. Member for Dartford (Mr. Dunn), having delivered that oration, has left the Chamber.
We are discussing a moral issue and not a party political issue. I hope not to embarrass the hon. Member for Beeston (Mr. Lester) by congratulating him. There are times when it is good for a Government, from whichever party it happens to be formed, to be defeated. I congratulate my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) on the Rooker-Wise amendment. There is no doubt that, although gracefully accepted by the Front Bench, it was a defeat for the Labour Government. That was right. Parliament is at its best when the views and feelings of hon. Members can cross the party boundary and morality can come through.
At the time when this proposal was introduced in 1980, no one in the House, let alone those involved in the legislation, believed that it was other than a temporary expedient. As explained by the then Secretary of State, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), it was a temporary expedient until taxation could be introduced for what are called short-term benefits. In fact, for many of the unemployed, it is long term and getting longer. Many Conservative Members, I believe, only supported what was then proposed in the confident belief that at some stage, when the Government could introduce a system of taxing short-term benefits, the blunt instrument would be withdrawn. I believe that the Ministers who said this at the time intended that it should happen.
It is therefore a matter of great dishonour that the Government, having found the means to introduce legislation to tax unemployment benefit, should decide not to remove the abatement. One wonders why they have acted in such a manner. Do they believe, genuinely and honestly, that there are 3 million people who do not want to work? No hon. Member can believe that. The vast majority of unemployed people are unemployed through no fault of their own. It is not their fault that they are unemployed. They want desperately to work. Why in heaven's name should we decide to penalise them?
I am not arguing against taxation of short-term benefits. I am arguing only that the Government should do the honourable thing and fulfil what Ministers at the time had every intention of doing. They should remove the abatement and restore the 5 per cent. One cannot believe


that the Government have set morality totally aside. It has been proved that the living standards of working people are going down. One of the first questions to which the recently arrived Member for Beaconsfield (Mr. Smith) received an answer revealed that between 1979–80 and 1981–82 there was a 6·2 per cent. decline in the real value of net income for those on half average earnings compared with a real increase of 8·1 per cent. during the last three years of the previous Labour Government. It is known that living standards are going down.
Are the Government arguing that, because the living standards of working people are going down, the living standards of the unemployed must be pushed down still further? I cannot believe that the Government would be so heartless. My hon. Friend the Member for Perry Barr made a brilliant case with the figures that he produced. Ministers are aware of the figures. This information does not come as a spark from Heaven. I cannot understand what argument the Government can sustain unless it is that they simply do not understand the humiliation of being unemployed. On top of that, the unemployed are brought into taxation but still receive a reduced level of benefit. This has resulted in great poverty.
The arguments of Conservative Back Benchers are much more important to the Government than those made by Opposition Members. The Government would expect these arguments from us, yet they have also been put with great force by all but one of the Conservative Members who have spoken. The moment arrives when one says that morality has to come before party commitment, before Whips and before total loyalty. I believe that loyalty to a moral belief will do great honour and credit to those who express it positively tonight. If the Government are defeated, as the previous Labour Government were defeated from time to time when it was right that that should happen, it will be an achievement for democracy of which all hon. Members can be proud.

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Mr. David. Crouch: I, too, am sorry that the Chancellor of the Exchequer is not here and has not been here at all during this serious debate. It must be said over and over again that we are debating one of the most serious aspects of this long Finance Bill at the end of the Session. For a brief moment the Chief Secretary appeared. We were grateful for that. Of course, we are grateful for the appearance at times of Ministers from the Department of Health and Social Security. I am glad to see my hon. Friend the Minister of State, Treasury on the Front Bench.
This is a serious occasion when the House of Commons is trying to make a point to the Executive. Hon. Members are trying to make the Executive understand that we are concerned about the state of the people and the state of taxation of the people. When Parliament is concerned about taxation, Parliament is dong its primary job. When Parliament is concerned about disadvantaged people, Parliament is doing the most serious job of all.
I know that the Chancellor of the Exchequer is a busy man at present. It is possible that he is considering and consulting about an adjustment to the Finance Bill as a result of the serious concern voiced on Government Benches about what is proposed in the Bill. I am sorry that he was not present to hear the serious speeches that have been made on both sides of the House by members of all parties, who expressed, not over-emotionally but seriously, with fact and figure, their argument that at this

time there is not just a recession but a serious depression for families, for wives at home whose husbands are unemployed and for children who see that their parents are unemployed and wonder whether they will get a job when they leave school at 16 or over. We live in a grave age.
Serious speeches have been made this afternoon. Parliament has been at its best—not in Committee, but on the Floor of the House. This is when the great moments occur when Governments are sometimes stopped in their tracks and think again.
The hon. Member for Birmingham, Perry Barr (Mr. Rooker) has broken through your barrier about names being mentioned, Mr. Speaker, in giving his name and the name of a former hon. Member to the Rooker-Wise amendment, which amended another Finance Bill, to which the right hon. Member for Norwich, North (Mr. Ennals) referred. I still hope that after tonight two other names will break the barrier—those of Lester and Needham—in the Lester-Needham amendment. It is in the name of the people and of the Tory Party that we need to pass the amendment tonight. I am speaking not against the Government but for the heart of the Tory Party.
Let me remind the House of the Government's approach. Of course they are not unthinking. They are faced with giant problems, as is the House. The Government, faced with those problems, have to make decisions. Perhaps as they face the Finance Bill they face the eternal question of how to make savings, cut expenditure and get rid of some of the anomalies.
The Government might ask: "Is it not right to reduce unemployment benefit now that the rate of inflation has been reduced so considerably and is still going down? Is it not right to ensure that unemployment benefit does not go up when wage settlements are coming down? Is it not right to do all that we can to ensure that the rate of unemployment benefit is not so high that it is an attraction for people not to work?" The Chancellor of the Exchequer and the Cabinet might ask: "Is it not right for the Government to strive all the time to keep down public expenditure?" There must be a limit to the amount that we as a nation can afford to allocate towards social provision.
The answer to all those questions should be "Yes, in certain circumstances," from any responsible Government, whether Conservative, Labour or of any colour, because that would be responsible. I said "in certain circumstances". However, the circumstances are not right at the moment. We still have inflation. The rate is coming down, but inflation is still between 9 per cent. and 10 per cent.
Wage settlements are lower but wages are still going up. It is still better to have a job than not to have one. Some would dispute that. Perhaps we shall hear more about that when we ask the electors what they think in a year or so. We know what one advisory body to the Government said about a wage for work and a wage for being unemployed. The Social Security Advisory Committee has observed that
very few people are actually worse off in work than out of work; those who are tend to be in very poorly-paid occupations and have large families.
That is an anomaly. Those of us who advance the case for generous treatment of the unemployed must accept that. Therefore, some people might find it better to stay out of work. We all acknowledge that.
Perhaps 3 or 5 per cent. of the unemployed believe that it is better to stay out of work, Will we accept that as the


norm, tell that to the electors and ask them to vote for us on it? Will we say in our manifesto that that is the norm? Of course we shall not. No Tory, Labour, Social Democratic or Liberal candidate would say that to the electors. The Chancellor of the Exchequer is not saying that now. He is saying merely that we should move in that direction.
I say again that the Chancellor of the Exchequer is right to strive continually to cut Government expenditure, remove anomalies and cut out waste. In November 1980 the Government decided, as an interim measure in lieu of taxation, to cut adult unemployment benefit. That was decided not just by the Government. Measures must be blessed and voted on by the House, which was done. Why did we do that? Because it was an interim measure. The House went along with that as an interim measure. There is no gainsaying that that was the meaning of what we understood to be a temporary measure. The whole House agreed that it was just that taxation should apply to those benefits. However, it could not be applied two years ago. Therefore, there was to be a temporary reduction of 5 per cent. in lieu of taxation.
The ultimate intention was to treat unemployment benefit like wage earnings and to make it subject to tax. The House agreed to that. The Conservative Party agreed with the then Secretary of State for Social Services, my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin). We were guided by his observations and the assurance that
as the employment benefit comes into tax so the rationale for the 5 per cent. abatement ends."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
We are not foolish in the House. What does that mean? My right hon. Friend is an honourable man. We believed what he said. Fair enough. That was helpful, sensible and responsible. The House of Commons acted in the same conditions of being helpful, sensible and responsible. We were considering an interim measure in lieu of taxation.
Now there is the proposal to tax unemployment benefit. We are not jibbing at that. We accept it. I accept it. I also accept that it will mean lower benefit to unemployed people, who are trying to keep their finances together, hold their families together, face the world, find a future and find a job. We also know that the decision now will mean that there will be a cut in the benefit unless hon. Members stand up for people irrespective of what party hats they wear. The House of Commons should stand up for people wherever they are—the 3 million disadvantaged people—and say that it does not believe that the Government have got it quite right. Some of us still maintain that, although the Government are not entirely wrong, they are not quite right. We are standing for the people tonight. We must ensure that they are not put at a serious disadvantage.
We were promised that the 5 per cent. cut was in lieu of taxation and would be reinstated eventually. Indeed, whether it was an understanding in the heart and mind of every Member of Parliament, it was on that understanding that we voted for the 5 per cent. reduction of unemployment benefit.
It may now be Government policy not to reinstate the 5 per cent. but it is not Tory philosophy. That policy goes against the very heart of Conservative principles. I am not speaking against anything. I speak for the principles of

Toryism. Our principles do not allow the disadvantaged to suffer the effects of economic realism and recession. We have always talked of a safety net to protect the disadvantaged from the workings of the economics system.
I do not know who invented the phrase "safety net". I have used it often when talking to my constituents. Perhaps it was my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph). [HON. MEMBERS: "It was Churchill."] Then it has even greater authority. As a good Tory I do not rely on edicts from the Central Office in Smith Square to tell me what Tory philosophy is or is not. I knew it when I joined the party. I know it whenever I address an audience or when I speak in the House. I know in my heart and mind what Tory philosophy and principles are. I shall not forget them tonight. My right hon. and hon. Friends should not forget them either. We must not forget the safety net.
I have loyally supported the Government's economic policies for the past three years. I am aware of their advantages. Inflation has been reduced, greater productiv-ity has been encouraged, industry has been streamlined and over-manning has been reduced. We all know what that entails. Some people suffer. Some people are made unemployed, even if only temporarily. We all realise that disadvantages can occur. I believe in economic realism, but the party also stands for compassion. We must remember that tonight. Economic realism is important but compassion is essential.
I was guided into the Tory Party by Rab Butler, Harold Macmillan and the reading of Disraeli's anxiety about the underprivileged nation in British society. For more than 100 years the party has tried to solve the problem of the two nations. The Conservative Party has a duty to remember its traditions. I shall vote for them tonight. I shall vote not against the Government but for my interpretation of Tory philosophy.

Mr. John Horam: I never thought that I would wholly agree with a speech from a Tory, but the hon. Member for Canterbury (Mr. Crouch) made such a one. I congratulate him on injecting instinctive philosophy into an otherwise rather emotional occasion.
The debate has been one-sided. I calculate that there have been 2½ hours of speeches in favour of the amendment and a speech of only 1½ minutes, if the right hon. Member for Norwich, North (Mr. Ennals) is right—

Mr. Ennals: I exaggerated—four minutes.

Mr. Horam: —in support of the Government's case.
The hon. Member for Dartford (Mr. Dunn) rested his case solely on the "Why work?" syndrome. It is odd if that argument is being used to muster Conservative support for the Government. Conservative Members who have been here for some time must educate the hon. Member for Dartford on what is at issue. It is not the "Why work?" syndrome. That is a problem, but it is overwhelmed by the present scale of unemployment.
The real problem that we must face is the gap in the living standards between those who are lucky enough to have work and those who are unlucky enough to be out of work. Moreover, acceptance of the amendment would make no difference to the "Why work?" syndrome. A sum


of £1·75 a week for a married couple will not make a profound difference to whether people are prepared to go to work.
Cutting unemployment benefit is no answer to the "Why work?" syndrome. Indeed, if it were, the logical progression of the Government's course would be an additional cut in unemployment benefit. The Government have never argued in that way, nor have they ever justified the 5 per cent. cut in those terms. They have justified it as an interim measure in lieu of the taxation of benefits. As the hon. Member for Canterbury said, it is a matter of believing or not believing what the Government said to their supporters when they introduced the measure. The hon. Member for Canterbury used one of the sacred texts of the Minister, who said that
as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
There can be only one interpretation of such a precise statement. It is now a question of honour. Do the Government believe that they can resile from so clearly stated a position when the measure was introduced?
The Bow Group put the matter even more brutally than the hon. Member for Canterbury. It said that:
the Government should restore the 5 per cent. abatement on the grounds that … the Conservative Party should not be seen to cheat.

Mr. D.N. Campbell-Savours: Will the hon. Gentleman clarify some confusion in many of my hon. Friend's minds? If he and his colleagues in the Social Democratic Party had attended the debate in March, today's debate would not have been necessary, because we would have defeated the Government then. Where were the hon. Gentleman and his right hon. and hon. Friends on that occasion?

Mr. Horam: The hon. Member for Workington (Mr. Campbell-Savours) should make clear why more Labour Members were not present.

Mr. Campbell-Savours: We were all here.

Mr. Horam: It does little good to rake over the past. Will there be sufficient hon. Members present to defeat the Government tonight? That is the more pertinent point.
First, therefore, is there a question of honour for the Government? Certainly there is a question of good faith. That is one reason why the amendment must be accepted.
Secondly, the amendment must be passed because the unemployed need the money. That is the most important consideration. The unemployed face the cumulative effect of the withdrawal of £1·10 for a single person and £1·75 for a married couple from the real value of unemployment benefit, the withdrawal of a further £1·90 through the recalculation of the child addition, and the abolition of the earnings-related supplement, which may mean a cut in average weekly pay of no less than £11·20. We are dealing with people who have to survive on about £50 per week—a situation difficult for most Members of Parliament to envisage, as we have rarely had to face it.
The Government have made the position even worse than they intended. By extending the 5 per cent. cut to all the unemployed, they have affected those whose income was so low that they would not have been taxed. Therefore, it is not just the links with the taxation of benefit. People whose earnings were so low that they would otherwise have escaped tax have also been harmed

and have suffered as a result. Moreover, they are not people who are in and out of unemployment perhaps twice in a year. This is the core of the problem. They are the long-term unemployed, so we are dealing with real hardship and real poverty. The amendment would at least be a gesture to people facing that situation.
Thirdly, the Government can afford the amendment. The facts are perfectly clear and are not disputed by the Treasury. The taxation of benefits would raise approximately £650 million in a full year and the amendment would cost about £60 million in a full year. Moreover, as Tory Back Benchers have made clear, we are not even talking about a full year, because we are already well into the financial year.
There is no doubt that the moral, social and financial arguments all point in the same direction. I salute the very small band of Tories who, for that reason, have consistently proposed and supported amendments of this kind. No doubt other Conservatice Members are wrestling with their consciences on this issue. I hope that they will give themselves the chance, well away from the Whips, the party machine and the rest, to consider this calmly and with real perspective. If they did that and voted for the amendment, they would not only do something genuinely good and helpful, small though it may be, but they would help in a small way to restore the good name of their party.

Mr. Charles Morrison: I return the compliment of the hon. Member for Gateshead, West (Mr. Horam). There was little in his speech with which I disagreed. Unemployment is high and likely to become higher in the short term. The situation is extremely serious. In the interests of national cohesion—or, as we would put it, of one nation—it is essential to give the unemployed confidence that the Government and the House at least understand their plight, limited by circumstance though our ability to cope with it may be. I cannot see how a 5 per cent. cut in unemployment benefit can help in that.
I supported the temporary abatement of unemployment benefit as an interim measure until benefits could be brought into tax. That has now been done, so my support for the abatement is at an end. Until now, the Government's justification was, very reasonably, for a temporary abatement. If the amendment is not accepted, they will have to justify a permanent cut in unemployment benefit. Once the period in which the abatement could be justified as temporary has ended, as it has with the application of tax, in the minds of most people the abatement becomes permanent.
So far as I can discover, unemployment benefit has been cut on only three previous occasions—in 1921, 19:28 and 1931. It would be a pity if we now added the year 1982, breaking a record of 50 years. Admittedly, we now have indexation, but the situation is entirely different because, despite the improvement, prices are still rising too sharply, whereas in 1931 they were falling.
My right hon. Friend the former Secretary of State for Social Services gave no absolute commitment to reinstate the abatement. I realise that in taking that view I disagree with some of my hon. Friends. It seemed to me, however, that my right hon. Friend carefully qualified his remarks. Nevertheless, his words were taken by many, if not most, people as an absolute commitment. Had they not been taken in that way, I very much doubt whether the Tory Party would have agreed to the abatement.
Most, if not all, Tory Members who support the amendment consider ourselves traditional Tories. As my hon. Friend the Member for Chippenham (Mr. Needham) said, whether we are in or out of fashion is neither here nor there. Some of us, too, have Tory origins and connections which go back a long way—to the time when some of our forebears left a Liberal Party which was pursuing a policy of laissez-faire, or what would now be called a free market policy, to the point of harshness and hardship. Our forebears joined a Tory Party based on a philosophy of compassion and one nation.
To me, therefore, not least because it is contrary to the traditions of the Tory Party, cuts in unemployment benefit are utterly repugnant. There are, of course, occasions in politics when some overriding need or consideration causes us to act in a way which in any other circumstances would be repugnant, but that need or consideration must be overriding. In the case before us today, I cannot see that it is.
The Government cannot argue that ending the abatement is too expensive or more expensive than was originally envisaged, given the latest estimates of the taxation yield and the cost of restoring the abatement. Nor can they argue that it would affect the "Why work?" syndrome. Several of my hon. Friends have dealt with that. I add one further point which may sound cynical but which I believe is none the less real. Given the level of unemployment and the fact that there are between 10 and 15 unemployed for every vacancy, even if some people were encouraged to wonder "Why work?" and to decide not to do so the only effect would be to relieve the pressure on those who want to work. In any case, research by the Policy Studies Institute has shown that there is no evidence that benefits reduce the incentive to find work. I believe that that is correct.
Nor can it be argued that the relationship between unemployment benefit and average earnings has done anything but worsen the position as my hon. Friend the Member for Chippenham said. In the present circumstances of high unemployment and low economic growth, it is a thin argument to pretend that the present unemployment benefit or an increase of it will have any effect on wage demands. Nor can it be claimed, given the quiet but no doubt sensible optimism of recent speeches by my right hon. and learned Friends the Chief Secretary and the Chancellor, that the economy is in such poor shape that it cannot withstand the cost of replacing the abatement. In any case, after overestimating the PSBR by £2 billion last year—even without taking into account the effect of the Civil Service strike—it seems inappropriate to become excited about a mere £60 million to £65 million this year.
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Nor should it be forgotten that one consequence of a cut in unemployment benefit, thus leaving many more people on social security benefit, would be to encourage people to run down their savings or capital so as to be able to qualify for social security. Yet the Tory Party is the party of savings and capital.
For the life of me, I cannot see why any overriding consideration should overcome my repugnance at the thought of cutting unemployment benefit in that way. Nor

can I see how at the next election the Tory Party will gain any points from claiming that it cut unemployment benefit by 5 per cent. or even from being accused of so doing.
Despite my remarks, the Minister of State may say that that abatement remains temporary. Perhaps in one sense it will remain temporary but I remind him that there is a danger, if not a certainty, that after today the reinstatement of unemployment benefit will be seen as an election gimmick. Rightly or wrongly, the electorate is sceptical of politicians' actions. In this instance, it would be better not to give people that opportunity for scepticism, just as it would be better to avoid the Conservative Party being accused of reducing unemployment benefit. I ask my hon. Friend to think again about accepting the amendment.

Mr. Don Dixon: If the amendment has achieved anything, it has concentrated our minds on those who are unemployed and living on the pittance that the State gives them. Every time that we are given unemployment figures we have a debate on the subject, and as the employment figures increase, so do the crocodile tears, but no hon. Member talks about the unemployed as individuals. They are discussed in terms of percentages. The unemployed are human beings and not part of a percentage. They have the right to work. When the House divides on the amendment, I hope that we shall go some way towards helping them.
When the hon. Member for Beeston (Mr. Lester) moved the amendment, he spoke with some compassion about the time when he was a Minister and visited an employment office. He saw the long queues of men and women waiting to sign the book and draw unemployment benefit. I know that the hon. Gentleman has compassion. That was probably why he was sacked from the Front Bench. He visited a ship repair yard in my constituency and showed that compassion to those who were unemployed and threatened with the sack.
I speak not with the knowledge of being on the other side of the counter at the employment exchange watching the queues, but of standing in the queue and waiting to sign the book with 1½ in of pencil tied to 3 ft of string so that it cannot be stolen, and then of going along to the office to pick up my dole money at the end of the week. Society has denied the unemployed the right to fend for their families. We are talking about breadwinners who have families to keep. The hon. Member for Croydon, South (Sir W. Clark) said that people should not get married if they are unemployed and cannot afford it. That is nonsense. Both my parents were unemployed when they were married. I am glad that they got married and that they took no notice of such statements.
The hon. Member for Gateshead, West (Mr. Horam) mentioned the "Why work?" syndrome. In my constituency the job of a receptionist at a community centre was advertised and attracted 267 applications. I do not know where all the "Why work?" syndrome people live. Millions of our unemployed would take any job tomorrow.
We have heard many flowery speeches, some concerned speeches, and many words of three of four syllables, and have seen many crocodile tears in the House on unemployment. I have received from a constituent a letter that sums up what it is like to be unemployed:
Please help me! Through no fault of my own, I have been out of work for over a year now. I assure you sir I have tried, I have looked for work. Within the last year sir, I have had over 52 formal interviews within South Tyneside and out—including


places as far as Dover, Hull and London. Some of these interviews I've even hiked it. Even whilst I write this letter sir, I promise I am seeking fitfull employment. I feel despair, I feel degraded, no longer a member of the human race.
The Government should show concern for such a person.
There are more than 6,000 unemployed in my constituency. The last pit in the constituency closed a fortnight ago, and the last ship repair yard more than 12 months ago. For those 6,000 who are denied the right to work, there are 35 vacancies registered at the employment exchange. When Labour Members talk about the unemployed, they do not talk about those who have money. Many people in Britain have never done a useful day's work in their lives, but they have money. We are talking about people who must work to fend for themselves and their families—people who do not have money.
It is bad enough being unemployed under this Government, but if one is aged over 45 and lives in the North-East it is a tragedy. I do not suggest that unemployment was introduced by the Government. In May 1979 there were 1,250,000 unemployed. Some of my colleagues on the Labour Benches have talked about acceptable levels of unemployment. There is no acceptable level of unemployment. My brother, who died two years ago, was unemployed for three years under the Labour Government. I need no lectures from either Conservative or Labour Members about unemployment. I am talking about people who are denied the right to work and who know that their only means of earning money is to work for it.
The Government, by not accepting the amendment, are doing a disservice not only to the unemployed who vote Labour but to those who vote Conservative. I hope that Conservative Members will join us in the Lobby tonight and do something for the 3 million unemployed who are struggling on the pittance that they receive.

Mr. Cyril D. Townsend: Unlike many of my hon. Friends, this is the first time that I have debated this subject. I trust that the words and actions of those who have signed the amendment will make it the last time. As the House knows, the stakes are high. They involve the political integrity of the Government and financial and social justice to those in our constituencies who are at present registered as unemployed.
We have been told that the abatement was temporary—indeed, an emergency measure. Many of us will have taken the trouble to refer to the various Hansard reports. Those who have approached the subject with a fresh mind will have come to the conclusion that, when economic circumstances permitted, the abatement would be made good.
I cannot claim to come to this debate with a fresh mind. In 1979 I was Parliamentary Private Secretary to the Minister for Social Security. I have loyally voted with the Government on every occasion that this measure has come before the House. However, on 4 July the rates of unemployment benefit for adults were brought into tax, and the position is thus totally transformed. This must be the moment for action.
In an admirable, cool and rational leader today, The Times stated:
It is unsatisfactory for explicitly temporary arrangements to be continued indefinitely when the occasion for them has passed.
Surely every right hon. and hon. Member can find truth in those words.
What are the arguments that the Government are shortly to deploy? I do not believe that it has been seriously suggested, for once, that the cost of £60 million is the clinching argument. Frankly, that cannot be, when the revenue savings are far outweighed by the official estimates of the revenue that will be derived in a full year from taxing benefit, and I support the taxing of benefit.
Will the Minister seriously suggest that the PSBR is the crucial point and defend the PSBR like a lioness defends her cubs? I do not believe so, because the PSBR is falling and that is an old, tired argument that we can wisely disregard, as we disregard old carcases.
A more subtle suggestion—I should respect my hon. Friend if he deployed it—might be that the £60 million could be better used. We all have our pet projects in social welfare, but I should hazard a guess that most of my hon. Friends would agree that the topic tonight rates high in the batting order.
Is it really the "Why work?" syndrome? Does that keep the Minister awake in the small hours? With 3 million out of work, and the number forecast to rise, I find that argument unconvincing. The case against the "Why work?" syndrome was well argued earlier in the debate.
Research was carried out by the Policy Studies Institute in 1980, when there was far less unemployment. It concluded:
In the vast majority of cases, and for 95 per cent of unemployed men there is a clear economic incentive to find work.
I trust, therefore, that the Minister will not waste the time of the House talking too much about the "Why work?" syndrome. If the Minister says that that is the main plank of the Treasury's case, the Chancellor is wrong to seek to use a measure introduced with one aim in mind for an entirely different and highly questionable purpose.
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A remarkable letter appeared in The Times a few days ago. It was signed by the director of the National Council for Voluntary Organisations., the acting director of the National Association of Citizens' Advice Bureaux, the director of the Low Pay Unit, the director of Age Concern, the assistant director of the National Association for Mental Health, the director of Youth Aid, the director of the Child Poverty Action Group, the director of Disability Alliance, and others. The final paragraph of the letter states:
We hope that, if the issue can be raised again at the report stage of the Finance Bill … the Government will finally concede that, as a matter of simple political morality, it must now restore to the unemployed the money which is owed to them.
We all have some knowledge, from our advice bureaux, of the plight of the unemployed. It would also be wise to take into account the feelings of those who produced that letter, the organisations they represent and, of course, the unemployed.
I have said previously in the House that Treasury Ministers would be prudent to give greater care and consideration to the unemployed, who are the victims of the drive to achieve greater competitiveness in British industry.
When, during a world recession, bigger burdens must be borne in the heat of the day, it is surely common ground in this country—and, I hope, in the Chamber—that the weakest members of society should not bear the major part of those burdens. To use a military analogy, one does not give the extra weight of ammunition to those at the back


of the march who are already straggling and suffering. If I had to argue my position to my constituents, I would not have much trouble in convincing them. The historic duty of the Conservative Party has been to seek to unite the many and varied groups in this great country and certainly not to exploit divisions.
Mention has already been made of Sir Winston Churchill. Many years ago, when talking about the social problems of his day, he used the splendid phrase "Bringing the rearguard in". That was his concept of social welfare. It is a concept that since the war has proudly served the Conservative Party and our people.
My vote for the amendment will be in support of that concept. I suggest, with respect to my right hon. and hon. Friends who will be voting against the amendment, that a vote for the Government will be in favour of letting that rearguard get further behind, increasingly isolated, dangerously dispirited and vulnerable.

Mr. Robert C. Brown: I add my congratulations to the hon. Member for Beeston (Mr. Lester) on tabling the amendment. I remember the hon. Gentleman, as a Back Bencher, coming to see me when I was a Minister. He had considerable compassion for his constituents who were made unemployed as a result of a decision that I had to implement. I remember his tenacity in fighting the case for his constituents.
As the hon. Member for Canterbury (Mr. Crouch) rightly said, this type of debate shows the House at its very best. I am only sorry that just before the vote is taken on the amendment the House will not be seen at its very best, because we shall then be listening to a reply from the Minister of State who will no doubt be at his smarmy best in an endeavour to convince Conservative Back Benchers that they should not take the ultimate action of voting against the Government, or even abstaining. I have the greatest sympathy for Conservative Back Benchers. I have been in exactly the same situation.
I feel great concern for the 23,156 unemployed in the city of Newcastle upon Tyne at the last count in June, and for the 230,000 unemployed people within the Northern region. The national figures show that over 1 million people have been unemployed for longer than a year. On that basis, 8,000 people in the city of Newcastle upon Tyne have been unemployed for longer than a year, and in the Northern region 80,000 people have been unemployed for longer than a year.
I hope that no one on the Treasury Bench, or anywhere else in the Chamber, will suggest that the 8,000 people in Newcastle who have been unemployed for a year or longer are unemployed of their own free will. I do not believe that any man has been unemployed for that long of his own volition.
My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) talked about the man on average earnings, with two children and a non-working wife, who would immediately lose about £80 a week on first becoming unemployed. Many of my constituents who are members of my union, the General and Municipal Workers Union, and are among the 23,000 unemployed in the city of Newcastle, were earning very much less than average earnings when they were employed. It might be

said that the hardship that they suffer on losing their jobs is therefore not so great, and I accept that their monetary loss is not as great as that of the man on average earnings.
We should remind ourselves that it was in November 1980 that the Government imposed the cut of 5 per cent. in real terms on the adult rates of several short-term benefits, including unemployment benefit. At that time, something else was happening that has not been mentioned in the debate so far. Those who were already swimming in very rich gravy were almost drowned in November 1980 when the extra gravy swept over them from the tax handouts of the Chancellor of the Exchequer in his earlier Budget. None of us can afford to forget that the top rates of tax were massively cut, and that even the standard rate was cut by about 3 per cent.
There is no real issue between the House and the Government tonight in relation to the ultimate making good of the so-called abatement. It is a matter not of "if" but of "when". There can be only one time when it should be done, and that is tonight. There should be no more prevarication. The Government should accept the amendment with good grace. Indeed, the debate should not have been allowed to go on for as long as it has. The Chancellor of the Exchequer should have been here at the start of the debate and within a short time he should have been on his feet announcing, without leaving it to the Minister of State, that the Government were prepared to accept the amendment.
In the course of the debate the hon. Member for Croydon, South (Sir W. Clark) seemed to get very agitated when my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) referred to him as the vice-chairman of the Tory Party. It was not a great error, and it was forgivable, because I understand that the hon. Gentleman is a past vice-president of the Tory Party.
The amendment seeks to remove unemployment benefit from taxation in November of this year if the Government do not by then restore the abatement. The amendment is not motivated by an outright opposition to the taxation of benefits in principle. I certainly do not oppose in principle the taxation of any income, and I do not think that anyone can do so. The amendment is simply a device to remind the Government publicly of their duty to make good the interim abatement once unemployment becomes taxable. I remind the Minister of State that unemployment benefit became taxable a week ago yesterday. We should put matters right tonight by accepting the amendment.

Mr. Alan Haselhurst: Tonight I shall be voting against the Government for the third time—each time on the same issue. Without getting involved in needless repetition, I should like to say why I have felt so strongly on this one issue when I have had a reasonable record of loyalty to the Government on almost everything else. To me it is a gut reaction—a political judgment.
As a Conservative, the one thing for which I am not in politics is to hurt those who are at a disadvantage in the community. It is wrong, at a time when many people have become unemployed, to be seeking to save small amounts of money by paring away at the benefits that should be paid to them. I do not believe that is right, and I do not think that it is sensible for the Government to adopt that stance when in the not too distant future they will have to face the electorate.
In my view, the Government gave a commitment on the issue. If they did not give a commitment, they allowed an impression to be created. If they did not allow an impression to be created, they dropped a hint. If they did not drop a hint, there was a nod to the effect that it would be a temporary matter. In whatever way we describe in the records of the House what has taken place, most of us believed that it was a temporary provision that would be put right with all speed. That is all we are seeking to encourage the Government to do on this occasion.
Why are the Government failing to deliver? Is it the money? It cannot be the money. Is it the "Why work?" syndrome? It cannot be the "Why work?" syndrome. Sufficient examples have been presented by my hon. Friends. Those who have any doubt about the "Why work?" syndrome may wish to give examples put to them by constituents of people who have refused to accept jobs that they have been offered, but against those examples are an equal, if not greater, number of cases from constituents who say "It has broken my heart when, having advertised a job, I have had to turn away the other 59 people." I do not believe that the "Why work?" syndrome is the correct argument for the Government to cite tonight in defence of their stubbornness.
Is it the wrong time? That is surely the tiredest excuse in politics. The Government are in severe danger of being misunderstood by the electorate if they do not realise that their honour is bound up with making good their pledge in the period in which the taxation has come into effect.
If the money were to be available, would it be better spent on something else? That is a question that I have heard from the Government side. Whether the Minister will refer to it tonight I do not know, but it is an extraordinary argument. On that basis, one could say that another 5 per cent. could be deducted temporarily from unemployment benefit, and then, when its restoration arose, the Government could say that it would be better to spend it on the death grant, retirement pensions or the handicapped. That is not the way to proceed.
We are discussing the matter within the terms and confines of unemployment benefit and the needs of the unemployed. The Government are raising a large extra sum—more than they expected to raise—so there is certainly room for £60 million on this occasion.
Is it the Government's pride that is at stake? Is it because we have become so bound up with the language of concessions and defeats that the Government find it difficult to come to the House and have a genuine change of line? If so, it is a pity. It does not help us if the Government always feel that it is somehow an act of weakness ever to concede to the arguments of right hon. and hon. Members. The Government would not be misunderstood in the country, and the party would not stand divided if they conceded. My impression—I can speak with the greatest confidence for my constituency—is that the party as a whole takes the view that we need to be as sympathetic as possible to the unemployed. It is surprised that the Government feel that this is a great issue of principle.
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This may be only a small point when set against the Government's strategy as a whole, but it is, as my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) said, a major point of honour for most of us. I could not hold up my head when facing the unemployed in my

constituency or elsewhere and say that I am concerned about their plight if I do not vote for the amendment tonight. It may be that that is my individual sense of honour, but it should be the collective sense of honour of the Conservative Party.

Mr. Frank Field: One of the advantages of catching your eye, Mr. Speaker, fairly late in the debate is that most of the arguments have been made and contributions can therefore be short. I have spent a fair amount of time listening to the debate, and the most distinguishing characteristic that has come across has not been the power with which a number of Government supporters have put the case on why they will not support the Government tonight, but that, with all the power at the Government's disposal, they have so far managed to persuade only one Conservative Member to speak in support of them.
The hon. Member for Dartford (Mr. Dunn) stood up, swallowed hard and spoke for about four minutes. I draw attention to the shortness of his contribution, not only because I hope that all of us will follow that example in the remainder of this debate, but because in other debates the hon. Member and I have conversed across the Chamber, sometimes at great length. Normally, the hon. Member does not have any difficulty in deploying a case at length. Tonight, the only Government supporter from their Benches has managed only four minutes in defence of their case. That is worrying for the Government.
The hon. Member for Canterbury (Mr. Crouch) was right to say that the feeling knitting the debate together was that of the House of Commons trying to make its will felt against the Government. I hope that as he and his colleagues spoke, many of my colleagues listened carefully and learnt the lesson of how important it is, should we have the opportunity to be in a similar position, to act with similar courage.
The other theme that has knitted the debate together is that no hon. Member has disagreed with the original reason for the 5 per cent. abatement. We have moved on that issue and are now in favour of bringing all income into tax, and tonight's debate is about bringing benefit into tax. There is no dispute there, although many hon. Members on both sides of the House have reminded the Government that they first introduced the 5 per cent. when there were two problems.
The first of these was that the abatement was a crude substitute for taxation; many people who would not pay tax would suffer the 5 per cent. deduction. The second was that while nobody had any objection to the taxation of benefits, one should not tax benefits until the tax threshold had been brought above the supplementary benefit poverty line. However, the Government went ahead and are now in difficulties of their own making.
Many hon. Members have asked what the Government's defence of continuing the 5 per cent. abatement is now that benefits have this month been brought into tax. The hon. Member for Gateshead, West (Mr. Horam) stripped the argument down to one central point, which is that the only argument that the Government can advance is the "Why work?" syndrome. The hon. Gentleman went on to say that no hon. Member could say that people are voluntarily unemployed. No hon. Member who goes about the country, talks to his constituents, and sits in his surgery and sees the private grief of the unemployed could advance that argument.
I have a much more important argument against this defence of the Government's position. It is that if the 5 per cent. strategy was working the unemployment figures would show a fall. However, the unemployment figures have risen, so the strategy is not working. The strategists may assume that if one does not succeed the first time one tries and tries again. One would then be on the horrendous course of continually cutting unemployment benefit until the unemployment figures come down. To put it this way is to show that that is not an argument that can be advanced.
I wish to introduce a different note into the debate. There is a real sense of grievance among many of the low-paid, not at the income that they might get when they are out of work, and how little different that is from their income in work, but at the amount that they pay in taxation. About 25 to 30 per cent. of wages are deducted in tax, and the real charge against the Government is that, while this is an important issue for millions of people, they do almost nothing about it.
The farce of this debate and the farce of the Finance Bill Committee debates is that there is no mention of, and no debate on, the fact that each year we allow 50 per cent. of personal income to be exempted from tax. And yet we debate the need to bring unemployment benefit into tax when about half of gross personal income does not concern the Chancellor of the Exchequer. If we were courageous enough to start a debate about how to rein back on all those tax benefits that have grown like Topsy, we could be talking about a standard rate of tax of about 12 to 13 per cent. in the pound and could be making a major difference to the tax bill of millions of low-paid workers.

Mr. Campbell-Savours: Regressive.

Mr. Field: I am not advocating that we have a single standard rate of tax at 13 per cent. I am using this as an illustration of the scale of changes that one has to make if all personal income is brought into tax. It would make such a difference to the amount of revenue that the Government take that they could not only raise the tax threshold above the poverty line, but could make substantial changes in the marginal rate of tax, and there would be money to make big increases in child benefit. All the issues that we have been talking about tonight could be dealt with and we could begin to build a floor on which people could build by their own efforts rather than having a welfare system which traps them into poverty or, worse than that, into deceit.
There are four reasons why we should support the hon. Member for Beeston (Mr. Lester) in his amendment. First, it gives a bad name to the slow process that we are starting of bringing all income into tax. There is a nasty flavour left in most people's mouths. It will be difficult enough to get the support of our constituents in the campaign to bring all income into tax without having to defend the Government on this issue.
Secondly, it is wrong because it undermines the national insurance fund. That has been the Opposition's argument. The argument of Government Back Benchers has been that it is against Tory policy, principles and beliefs. They believe that people should be encouraged to put money away for a rainy day to look after themselves. That is done individually, and it is done collectively through the national insurance fund. We have a Tory

Government with a high priestess running them who preaches endlessly about the need to stand on one's own two feet, and yet the Government take measures to clobber people who do precisely that by trying to save through the insurance system. That is the second reason for supporting the amendment.
The third reason is the sense of grievance felt by millions of low-paid workers at the amount that they lose every week in taxation. We shall remedy that grievance only if we bring most income into tax. The 5 per cent. abatement is a decoy rather than an issue for essential debate.
There is a fourth reason, and every hon. Member who has spoken, even the hon. Member for Dartford, mentioned it, and that is that the 5 per cent. abatement is an attack on unemployed people. If we believe the Prime Minister when she puts forward the argument that it is necessary to increase the number of unemployed people so that the rest of us can benefit by a fall in the rate of inflation, then tonight we are kicking on the shins—if not higher up their anatomy—those who are bearing our unemployment.

Mr. Matthew Parris: I apologise to my hon. Friends the Members for Beeston (Mr. Lester) and Chippenham (Mr. Needham) for missing the earlier part of their remarks. I am not on the Left, the Right or the Centre of the Party. I suppose one might say that I was elsewhere.
I felt anxious about our failure to restore the abatement, because I served on the Social Security (No. 2) Bill Standing Committee. I asked myself which of my hon. Friends might share my anxiety so that I could educate myself a little more on the background to the issue. I thought of my hon. Friend the Member for Bristol, West (Mr. Waldegrave). It then occurred to me that there would not be much point in consulting him. I thought of my hon. Friend the Member for Watford (Mr. Garel-Jones), and a similar reason struck me. I then thought of my hon. Friend the Member for Oxford (Mr. Patten), and I realised that that would not be a sensible avenue to pursue. Something dawned on me that should have dawned on me a great deal earlier.
I want to confine myself to the rather legalistic point that an explicit undertaking has been broken. I do not want to deal with whether this money—had we made no previous undertakings—should be spent for this purpose at this time. The hon. Member for Gateshead, West (Mr. Horam) said that all the moral, social and financial arguments pointed to the need for the money to be spent in this way. For any of the purposes for which the Government spend money to help people, there are always moral, social and financial reasons for helping them more. A decision has to be taken after the competing claims, which are not properly explored in a debate such as this, have been looked at. I should be ruled out of order if I were to detail those competing claims.
Perhaps we should spend the money in the way suggested, but, despite what we have heard, that is capable of argument. However, it cannot be argued that an undertaking that is clearly given should be lightly broken.
I served on the Social Security (No. 2) Bill Committee. The grounds on which my right hon. Friend the Secretary of State for Social Services, who is now the Secretary of State for Industry, was arguing for the abatement to take place were clear to me and, I am sure, to all members of


the Committee. It would have been open to him to argue the point upon the grounds advanced by my hon. Friend the Member for Dartford (Mr. Dunn) upon whose head much calumny has been heaped this evening. I do not agree with him, but I believe that they are intellectually respectable grounds. My right hon. Friend could have argued that unemployment benefit was too high, but he most notably did not. He simply suggested that unemployment benefit should be taxed, that it was to be taxed and that in the interim there would be a 5 per cent. abatement. Now that unemployment benefit is to be taxed, it is not honest to refuse to restore that abatement. I do not regard this as a massive betrayal of faith, nor the most shameful thing that this or any Government have done. It is a shabby thing to do. I hope that the Minister will not insist on taking us with him into the Lobby against the amendment.

Mr. David Winnick: I apologise for not having been present earlier, but I was at a Select Committee meeting. In the speeches that we have heard, particularly those of the hon. Member for Bexleyheath (Mr. Townsend) and the hon. Member for Canterbury (Mr. Crouch), we have listened to the Tory conscience. Those Conservative Members who support the amendment have no need to justify their conduct in any way. It is those who follow the Government on this issue who need to find some justification for their vote.
It is a simple issue of injustice. We all know the background. In November 1980 the increase in unemployment benefit was abated by 5 per cent. in lieu of taxation. Now that taxation is being applied to unemployment benefit, that 5 per cent. is not being restored. It is important to remember that we are dealing with the most vulnerable section of the community, those who are living on the lowest incomes.
From November, unemployment benefit will be £40·45 for a married person and £25 for a single person. The action taken over the 5 per cent. is only part of the action taken by the Government against unemployed people. The earnings-related supplement was phased out and finally abolished, and that has meant that on average unemployed people have lost £11·20 a week. I find it difficult, as I have said previously, to understand how the abolition of the earnings-related supplement can in any way be justified.
The change in child dependency has meant the loss of about £1·20 for each child of an unemployed person. Tax rebates cannot now be claimed until the end of the year. Under the new arrangement, someone who becomes unemployed, and who desperately needs all the money that he can possibly get, cannot claim the tax refund to which he is entitled until the end of the financial year.
Hon. Members on both sides of the House have made the point that those who have saved have been penalised. My constituents, like those of other hon. Members, having become unemployed may have their redundancy money and some savings and so on, but if they have more than £2,000 they cannot claim a penny in supplementary benefit. The £500 increase—a ceiling of £2,500—from November is not sufficient. It is a disincentive to save and causes resentment.
Constant reference has been made today to the ways in which the unemployed will be liable to taxation, but in reply to a parliamentary question I was informed that about 1¼ million, or 40 per cent., of the unemployed will not be

subject to tax. Their income is too low. People whose income is so low that it is not liable to tax will be penalised as well, and those subject to taxation will be doubly taxed. They will pay ordinary tax, and the 5 per cent. has been taken away from them. The system is equally unjust to both. The poorest are being hit both ways.
That is the result of Government action. In the past two or three years the Government have benefited the richest. But the poorest people may get only £40 a week if they are married and £25 if they are single. No one in the House, including the Chancellor and the Minister of State, would try to live on that money. The people about whom we are talking are the most deprived and vulnerable and are the victims of the Government's economic policy. Even though taxation of benefits is being introduced this month they are still not receiving the 5 per cent. back. But the people with the largest incomes, who least need tax reductions, have done very well. In the past two or three Budgets their taxes have been reduced.
One cannot help comparing how the Government treat the most prosperous and the poorest. The rich have been well rewarded with money that they do not need, while those who are trying desperately to survive are being penalised and punished. That is why even Conservatives have today spoken against, and I hope will vote against, the Government.
The most interesting speech, I think, came from my hon. Friend the Member for Jarrow (Mr. Dixon), who understands unemployment. He mentioned his brother. He comes from a background where there are a great number of unemployed and he mixes with his constituents. I wonder whether the House always understands what it means to be unemployed, not only for the young, but for the middle-aged who have had a job and sufficient money to make ends meet for some time. Suddenly, at 45 or 50, they may become unemployed, and in parts of the country, including now the West Midlands, they have the awful prospect of being unemployed for years on end and having to live on the most limited income. They cannot properly care for their families and have to think of every penny that they spend.
I wonder whether the Prime Minister, the Chancellor and the other members of the Cabinet appreciate the harm that they are doing to the unemployed. The amendment is justified, and I hope that it will be carried.

Mr. Andrew F. Bennett: This has been a useful debate and many issues have been covered.
I challenge the Chancellor and the other Treasury Ministers whether unemployment benefit is adequate. That is the central question. I challenge them to restrict their spending to that of an unemployed man for two or three months. They would quickly realise that it was not adequate. Many thousands of people find it virtually impossible to get by on the benefit.
Last Friday I came across two constituents having a whispered row by the pre-packed meat counter in a supermarket about whether to spend a little more on a joint and enjoy the sort of meal to which they were accustomed when the husband was at work or to skimp and spend the money on something else. Many thousands have to make such choices. If Ministers listened to such conversations they would see that the benefit is not adequate.
A constituent came to my last advice bureau apologising for being late. He had walked three miles. He wanted advice on housing, but another problem was


gnawing at him: how could he give his kids a holiday? He felt it was impossible to save from his unemployment benefit. All he could hope for for them was a day in Blackpool, and that would mean saving each week what he would spend on bus fares to cope with the necessities of life. Can it be said that his unemployment benefit is adequate?
Another constituent at the same bureau blamed the Chancellor for ruining his sex life. For years he had worked shifts. The only privacy that he and his wife had was in the mornings, first when his children were at school and then when they were at work. Both his teenagers are now out of work and have to stay at home all the time because they cannot afford to go anywhere as it costs money. His children do not have sufficient money to go out and mix with their friends who are in work, thereby giving their parents some peace and quiet.
Yet another constituent on the same occasion was upset about his debts. The family were borrowing from the rent money to pay the gas bill and from the gas money to pay the electricity bill. Two or three years ago they were a happy family with young children, but there are now continual feuds over why the debts are getting worse. The same problems crop up time and again for people on these incomes. The wife admitted to me that last week she had a row with her husband about their debts and the fact that they could not manage. He stormed out of the house. She assumed that he had gone to the pub, but he had cooled off, bought some flowers, and brought them home. Of course, she made the mistake of grumbling that that made their debts worse. One can see how the feuds are fuelled by poverty and unemployment.
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I challenge the Chacellor to say that this unemployment pay is adequate, and to tell us how he would get by on it. What about the 60-year-old in my constituency who has no chance of getting work? He not only sees the lifestyle gone that he enjoyed during the past few years, but he sees all opportunities of saving for his old age gone. He knows that, when he draws his pension at 65, it will be reduced because, for the next five years, he will not be able to contribute to the earnings-related part of it.
I challenge the Chancellor to talk to some of the shopkeepers in my constituency. Their incomes are going down because an increasing number of their clients are on unemployment benefit and cannot afford to spend money in their shops. A constituent set himself up as a window cleaner a few years ago. He did quite well, but he has now lost almost half his clients, because they are on unemployment benefit and can no longer afford to pay someone to clean their windows. They clean their windows themselves. He sees his little business disappearing before his eyes because of the lack of money in the area to pay for such a service.
The Chancellor should tell us whether unemployment benefit is adequate. In my opinion, it is not, and I am sure that most of my constituents who have to survive on it do not consider it adequate. They believe that he should put back the 5 per cent. immediately, and that that should be only a first step in raising unemployment benefit to an adequate level and thus avoiding the misery and hardship of the many people who are struggling to get by on inadequate incomes.

Mr. Allen McKay: I shall not detain the House long. First, I congratulate the hon. Member for Beeston (Mr. Lester) on his amendment. Recently, I had the priviledge of serving on the Mental Health (Amendment) Bill Committee with him. I saw the House at its best in those proceedings. All disciplines were working together to bring out the best that there is in legislation.
That spirit has continued in this debate. I am sure that the Government realise that, whatever the outcome of the vote tonight, they have lost the argument, both physically and morally. If they have any sense of honour, the Minister will acknowledge, when he comes to the Dispatch Box, that he has lost the argument and concede the amendment, because we are not asking for a lot.
Taxation is always subject to criticism, because no one likes paying taxes. However, the unemployed are the only people who are taxed twice. Not only are they subject to income tax in the normal way, but, unless the 5 per cent. abatement is returned, they are taxed again. In my opinion, these people should never have been taxed at all. People argue that all incomes should be taxed, if that can be done with equity, but it is difficult to explain that to people who are taxed twice. It is hard to sell that argument to my constituents.
If the Minister tells us about the workshy syndrome, he should look at what has happened in part of my constituency. In the Thorncliffe Valley, during the short period of two years, two collieries have closed. Green's foundry and Paramour's foundry have closed. Aurora Steel was closed because of the import of special steels. There were redundancies at British Steel. In fact, last week Mr. MacGregor told me that another 10,000 jobs would have to go if the industry was to slim down, and that some of those jobs would be in my constituency. Then there is Ransome and Rapier and Newton Chambers engineering works. They are all world-renowned names. Among the workers at Ransome and Rapier who will have to go are 450 craftsmen engineers and 36 apprentices. The whole training scheme and the apprentice shop will close. Never before has the area heard of 36 engineering apprentices being made redundant. That is the blight of unemployment that has hit the Thorncliffe Valley.
I am sure that many people saw the return of the "Canberra", and many of us cheered the Army coming back from the Falkland Islands. It is ironic that some of the parents of the people whom we cheered are the people who will be hurt by this legislation.
I have spoken to shop stewards about the situation, and they say that it is becoming harder and harder to ask people to take redundancy or early retirement. They are now looking at the £2,000 cut-off scheme, which is going up to £2,500, and the superannuation benefits or pension benefits from the trade unions, because the pound for pound that is taken off unemployment pay is also having an effect. It is no longer possible to make way for younger workers.
The Government did great harm when they took away the earnings-related supplement. When people come to me and complain I say to them "You knew what you were voting for when you voted this Government into power, because it was spelt out—admittedly, not always very clearly." However, they did not vote for unemployment. On that, the Government have really let the people and the country down, because unemployment has risen ever since they came to power. Now the Government are putting the


boot in. Not only have people been made unemployed and their benefits cut; they are now being taxed twice. That is what the Government are doing.
I have listened to what Conservative Members have argued today in this debate, and I am sure that they should be with us in the Lobby tonight. I was told many times the saying
Our country, right or wrong!",
until I found out that there was a little bit to add to it. It is:
Our country, right or wrong! When right, to be kept right; when wrong, to be put right!
Right hon. and hon. Members how have the chance to put the Government right.

The Minister of State, Treasury (Mr. Barney Hayhoe): I have listened to every speech in this important and serious four-hour debate. One of the themes that has run through all the speeches has been the concern felt on both sides of the House about unemployment generally and, in particular, its effects on individuals and their families. Many hon. Members have said that this is a House of Commons matter. I do not dissent from that. How could it be otherwise? The House will decide this issue by its vote tonight. That is our way, and that is why we are here.
I congratulate my hon. Friend the Member for Beeston (Mr. Lester) on his presentation of the amendment. His humanity, moderation, commitment and concern showed through, and his speech and the speeches of many of my hon. Friends were in somewhat sharp contrast to the more strident notes of the speeches of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), and the hon. Members for Birmingham, Perry Barr (Mr. Rooker), Walsall, North (Mr. Winnick), and others. To some extent, we have had a rerun of our earlier debates of 18 March and 26 April.
It has been said that the Government are going back on clear pledges that were given by my right hon. Friend the Secretary of State for Industry, and that there was a clear commitment by the Government to the automatic restoration of the 5 per cent. abatement when unemployment benefit was brought into taxation. In opening the debate, my hon. Friend the Member for Beeston made no such suggestion. However, that suggestion was made by the right hon. Member for Ashton-under-Lyne and several other hon. Members. My hon. Friend the Member for Beeston was right, because no such pledge was given.
In all fairness, I should put on the record what was said by my right hon. Friend the Secretary of State for Industry, then Secretary of State for Social Services, when he gave the clear assurance that when invalidity benefit was brought into tax the 5 per cent. abatement would be restored. In Standing Committee on 29 April, he said:
For the other benefits affected,"—
that includes unemployment benefit—
which are quite different, I cannot at this stage go beyond the more general assurance I have given that we shall consider what should be their gross rates in the light of economic and other circumstances prevailing at the time that each of them comes into tax."—[Official Report, Standing Committee B, 29 April 1980; c. 393.]
I readily and willingly acknowledge that some of my hon. Friends, as they have said clearly in debate today, genuinely and sincerely believed that when unemployment benefit came into taxation—[Interruption.] I know the quotations as well as the hon. Gentleman. I have read them

all. I quite properly quoted one which supports the view of the hon. Member who introduced the amendment that there was no clear commitment. I believe that that is so.

Mr. Robin F. Cook: rose—

Mr. Hayhoe: I shall not give way now.
My right hon. and learned Friend the Chancellor of the Exchequer made it clear in his 1980 Budget that the 5 per cent. abatement decision was not taken solely as a proxy for taxation but as part of a public expenditure savings package and that it was likely to improve work incentives.

Mr. Cook: rose—

Mr. Hayhoe: No, I shall not give way now. I have listened to the arguments. It is only fair that I should have an opportunity to reply to them.

Mr. Cook: I refer the Minister to the most recent statement from his own Front Bench when we debated the matter last March. As has been pointed out, in the course of his speech, the Minister for Social Security said:
At the right time it will be made good."—[Official Report, 18 March 1982; Vol. 20, c. 536.]
If the right time is not the moment at which unemployment benefit enters into tax, when is the right time?

Mr. Hayhoe: I should not have given way. I shall come later to what was said by my hon. Friend the Minister for Social Security.
I was challenging what was said by Labour Members—that a matter of honour was involved because a clear pledge and commitment had been made by my right hon. Friend. I utterly repudiate that. No such clear pledge and commitment were made.

Mr. Rooker: rose—

Mr. Hayhoe: I shall not give way now. The yield from taxing unemployment benefit in a full year is £650 million. I confirm that the gross cost of reinstating the 5 per cent. abatement would be £60 million. It has been said that we are talking about reductions in unemployment benefit. My hon. Friend the Member for Canterbury (Mr. Crouch) said "It is not right to reduce unemployment benefit." Both he and my hon. Friend the Member for Devizes (Mr. Morrison) spoke of a cut in unemployment benefit this year. The truth is that unemployment benefit will be increased by 11 per cent. in November 1982. The argument today is whether it should be increased by 16 per cent. or 11 per cent. Those are the figures relating to the increase later this year.
Much has been said about the 3 million unemployed. Again, as my hon. Friend the Member for Beeston made clear, fewer than one in four of the total number unemployed are directly affected. The hon. Members for Gateshead, West and Newcastle-under-Lyme (Mr. Golding) spoke of the long-term unemployed. However, they should know that those who have been unemployed for more than a year are not affected by the abatement in any way because they are not entitled to unemployment benefit after that time. They are on supplementary benefit
We must get all these matters into perspective. The full year cost of reinstating the abatement is, as I said, £60 million. My hon. Friend the Minister for Social Security made it clear in an earlier debate that his Department has many claims for additional spending. There are many deserving causes. I have since reaffirmed that at the right


time this benefit will be made good. The matter is under review, it will be kept under review, and I can only repeat that at the right time it will be made good.

Mr. Cook: In The Guardian yesterday we read that two Ministers had secretly conveyed a message to the rebels that the Government hoped that they would succeed with their amendment. Having listened to the Minister's brief and tawdy response to a debate involving major issues and in which several Conservative Members went to great length to explain their difficulties in supporting the Government, I am tempted to suspect that the Minister is one of the two who would like to see the amendment carried.
I hope that the Minister will acquit me of any disrespect. Hitherto, he has been one of the Government Members for whom I have had a warm regard, but it is an offence to the House that on such a major issue, when the debate has continued for four hours and raised major issues of principle and brought into question some of the statements by senior Government Members over the past two or three years, a junior Treasury Minister should respond. The House was entitled to a reply from one of the two Cabinet Ministers.
Hon. Gentlemen may wonder why I respond at this stage. Let me make it perfectly clear. Some Conservative Members have not been present throughout the debate. They may not be aware that this is the second intervention from the Opposition Front Bench. We take the matter seriously enough to believe that it merits two interventions. The earlier intervention was by the Opposition analogue to the Chief Secretary to the Treasury. Hon. Members who tabled the amendment were entitled to a response from the Chief Secretary or the Chancellor.

Mr. Geoffrey Dickens: The hon. Gentleman has just claimed that Labour Members take the matter seriously. Where are the Labour Members of whom he speaks?

Mr. Cook: We welcome the hon. Member for Huddersfield, West (Mr. Dickens) to our debate. The answer to his question will be given at the conclusion of the debate when we see who is in which Lobby. We shall watch with interest to see which Lobby the hon. Gentleman goes into.

Mr. Dickens: It will not be the hon. Gentleman's.

Mr. Cook: I must correct the hon. Gentleman. It is not a question of our Lobby; it is a question whether he goes into the Government Lobby or that of his hon. Friends who are seeking to save the Government from their own breach of faith.
The House owes a debt to the courage and persistence of a number of Conservative Members who have continued to try to expose what they regard as an injustice. Once again we have seen an almost unanimous condemnation of the Government from their own Benches. As on the previous occasion when we debated this matter, only one Conservative Member could be found on the Back Benches to speak in support of the Government. This time it was the hon. Member for Dartford (Mr. Dunn), who spoke, by various estimates, for between two and four minutes and immediately rushed from the Chamber, so overcome was he by embarrassment at what he had done.
It is always difficult to know what to do in a situation like this. Perhaps the cruellest thing that an Opposition spokesman can do is to praise the Conservative Members who support the amendment. That may merely get them into even greater trouble with their Whips. Perhaps the kindest thing for us to do is to flail them mercilessly for having failed to convince their Government.
In kindness to those hon. Members, I begin by putting on the record the fact that there is a gulf between them and the Opposition. We are not yet convinced that the Government's scheme to bring unemployment benefit into taxation is fair, practicable or necessary. On the contrary, we see the scheme as yet another demonstration of the way in which the Government are remorselessly and desperately hunting among the lower deciles of national income to find additional tax revenue so that they can give tax handouts to the wealthy.
The hon. Member for Chippenham (Mr. Needham) asked an interesting parliamentary question last month about what tax payments would be made, as a result of the scheme, by those who are unemployed for part of the year. I point the House in particular to the column in the answer given to the hon. Gentleman that sets out the figures for a married couple on three-quarters of average income—that is an income well below the national average. If the head of the household falls unemployed in the second half of the year after the couple had been employed for the first half of the year, the household will pay £305 more in tax as a result of the scheme that we are debating. It is scandalous that we should be asking those with below average incomes to pay more, when the wealthy are time and again being asked by the Government to pay less tax. That is one division between the Opposition and the Conservative Members who support the amendment.
However, we are with those hon. Members on the major issue that is at the centre of the debate, which is the proposal to introduce the scheme to bring unemployment benefit into tax without restoring the 5 per cent. that was docked from the benefit two years ago on the pretext—let us be clear about that—that unemployment benefit was not then taxed.
A number of independent commentators and bodies have argued that unemployment benefit should be brought into tax. We recognise that the idea has a long and respectable pedigree. Professor Atkinson has proposed it, and the Institute of Fiscal Studies has proposed it, but each has argued that the benefit should be taxed and the proceeds from the tax revenue used to increase the benefit. Until the Government obtained success at the last general election, no one had ever seriously contended that we should bring the benefit into tax and simultaneously cut the level of the benefit. There is no excuse for that.
As a number of hon. Members have said, the scheme will result in a large revenue to the Treasury. Hon. Members have calculated that the revenue will be 10 times the amount required to make good the 5 per cent. abatement. The pertinent figures are even clearer. One of the great unresolved mysteries of the business has been the extent to which the Treasury's estimate of the revenue has varied. Last year we were told that the revenue would be £250 million. This year the Treasury estimates that, for some unexplained reason, it will get £650 million. If the Treasury has such a wide margin of error in its calculation


of the revenue that it will receive, it obviously has not the faintest idea of how well the scheme will work when it hits the unemployed.
We can see that the Treasury will get from taxing unemployment benefit £410 million more than it expected last year: it will have a windfall of over £400 million. In all fairness and decency, the first charge on that £400 million must be the restoration of the 5 per cent. abatement, which will cost a mere £60 million.
The restoration of the abatement must be the first charge for a number of reasons. First, the House was led to believe that that would happen. It is necessary to take up a point made by the Minister in his brief response. He put to the House a quotation to rebut another quotation that he did not read into the record. Hon. Members have spared the Minister that other quotation, because we assumed that it was known. Since he has chosen to challenge it, let us be clear what was said. Let us also be clear that the undertaking that I shall quote was given the day after the quotation that the hon. Gentleman read into the record.
The then Secretary of State for Social Services, referring to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), said:
The hon. Gentleman asked specifically about abated unemployment benefit. That will make no difference, because as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
It is pointless to argue whether that statement constituted a legally binding contract that would stand up in a court of law, but it is perfectly clear that the Committee was led to believe by the Secretary of State that when taxation of the benefit was brought in the 5 per cent. abatement would be restored. The right hon. Gentleman's comments lent colour to that belief. If we are now told that that is not what was intended by the right hon. Gentleman and that the Committee was wrong to draw that conclusion, we are being invited to say that we should not have taken a Minister's remarks at face value. What the right hon. Gentleman said was perfectly clear.
The hon. Member for Derbyshire, West (Mr. Parris) suggested that this was not a large but a minor breach of faith. The House cannot tolerate a relative scale in breaches of faith. A breach of faith is a matter of absolute concern. The House, and particularly Conservative Back Benchers, cannot permit the Government to commit a breach of faith. We were led to believe that the 5 per cent. abatement would be restored when taxation was brought in. Taxation was brought in earlier this month and the 5 per cent. must, therefore, be restored.
Another reason why the 5 per cent. abatement must be restored takes me to the speech of the hon. Member for Dartford, who argued that it was necessary to withhold the abatement because of the "Why work?" syndrome. While we have 3 million unemployed, and an increasing trend of unemployment, it is an insult to the unemployed to suggest that they are out of work because they lack the motivation, the will or the financial incentive to find work.
I will give the hon. Member for Dartford an example from my area. Last month, Strathclyde regional council advertised 31 apprenticeships. There were 7,000 applications. It is a grotesque offence to the 6,969 children who did not get an apprenticeship to say that they are out of work because of the "Why work?" syndrome. They are out of work because they cannot find work.
8 pm
I shall spare the House the argument about whether the Government are to blame for the 3 million unemployed. Some of us have a view on that matter, and doubtless it is not shared by the hon. Member for Beeston (Mr. Lester), who tabled the amendment. All that I would ask the House to agree, and I would ask even the hon. Member for Dartford to agree, is that the 3 million unemployed are not to blame for the fact that there is such a high level of unemployment. Because they are not to blame, it is incumbent upon us not to penalise them for being unemployed. That is the third reason why we should restore the 5 per cent.
As my hon. Friend the Member for Perry Barr and some of my other hon. Friends have said, the withdrawal of the 5 per cent. is not an isolated act. There has been a series of cuts in the level of benefit enjoyed by the unemployed. There was the withdrawal of earnings-related supplement, the changed basis on which child additions are calculated, and the withdrawal, under this scheme of taxation, of the tax refunds. Those changes have had a major impact on the standard of living of the unemployed. Indeed, we know from the Social Security Advisory Committees latest survey that half of all those families now have an income from benefit that less than half the income that they had in work.
Plainly, any household faced with a halving of benefit will not be troubled about a financial incentive to remain in work—members of that household will look for work. Given the dramatic reduction in the standard of living of the unemployed over the last three years, in all fairness we should accept the recommendation of the Social Security Advisory Committee and make the first priority of our increased expenditure on the social security budget the restoration of that 5 per cent.
I shall not suggest that financial hardship is the greatest problem faced by the unemployed. I have met many unemployed in my constituency, as I am sure other hon. Member have done in theirs in the past two years. What distresses me most about them is that they are concerned not simply with financial hardship but with the humiliation of being denied a work place in society. It is through the work place that most citizens make their contribution to society. It is through their jobs that they achieve their identity with the community. It is their job that provides the most fulfilling and creative thing that they are likely to do with their lives. If we deny a man his job, if we deny him that work place, we are denying him an identity with society and robbing him of his dignity and self-respect.
I do not suggest that if we give 5 per cent. to the unemployed we will give them back that dignity and self-respect, but we will at least go some way to ease the severe financial problems that they face. We will go some way to help them to meet the cost of searching for work—to meet the cost of the postage, the phone calls, the travel and the decent appearance that is necessary if they are to find work. Therefore, we should restore the 5 per cent. to the unemployed.
We know that that view is shared by at least two DHSS Ministers, because The Guardian tells us so. Yesterday, it said:
Some Ministers at the Department of Health and Social Security are secretly hoping that the Government will be defeated tomorrow … two of them have indicated to the Tory rebels that they sympathise with the revolt.


I am invited by that article to speculate about the two Ministers concerned. Is it the Minister of State, who sat throughout most of our debate and was kept carefully bound, trussed and gagged, two Treasury Ministers away from the Dispatch Box, in case he said to us what he appears to have said to The Guardian? Is it the Undersecretary of State, the hon. Member for Braintree (Mr. Newton)? That would be a pleasing thought, because he was formerly the Finance Bill Whip. It would be pleasing to reflect that someone who spent the first two years of the Government's term of office helping to get Finance Bills enacted has now undergone such a reformation that he is seeking to undo the damage of this Finance Bill. I do not expect that we shall find out who the two Ministers are when the Division Bell rings in two or three minutes. I do not expect that we will find DHSS Ministers in the Lobby with us. I hope, though, that we shall find a large number of the hon. Members who have spoken and their hon. Friends in the Lobby with us.
When we divided on this matter in April, we were told that that was not the time to divide the House because there were other matters that concerned the nation. This is the last chance for the House to restore the 5 per cent, before taxation takes effect. This is the day and this is the hour for hon. Members to restore that 5 per cent. The Opposition will go into the Lobby to vote enthusiastically to restore the 5 per cent. We will do it because we believe that it is an elementary justice owed to the unemployed who need that 5 per cent, and who are entitled to that 5 per cent., and the House, in all earnest decency, owes them the restoration of that 5 per cent.

Question put, That the amendment be made:—

The House divided: Ayes 283, Noes 291.

Division No. 268]
[3.40 pm


AYES


Adley, Robert
Farr, John


Alexander, Richard
Fell, Sir Anthony


Amery, Rt Hon Julian
Fenner, Mrs Peggy


Ancram, Michael
Finsberg, Geoffrey


Aspinwall, Jack
Fisher, Sir Nigel


Atkins, Rt Hon H. (S'thorne)
Fletcher-Cooke, Sir Charles


Atkins, Robert (Preston N)
Fookes, Miss Janet


Atkinson, David (B'm'th,E)
Forman, Nigel


Baker, Kenneth (St.M'bone)
Fowler, Rt Hon Norman


Baker, Nicholas (N Dorset)
Fox, Marcus


Banks, Robert
Fraser, Rt Hon Sir Hugh


Beaumont-Dark, Anthony
Fraser, Peter (South Angus)


Bendall, Vivian
Garel-Jones, Tristan


Bennett, Sir Frederic (T'bay)
Glyn, Dr Alan


Benyon, Thomas (A'don)
Goodlad, Alastair


Bevan, David Gilroy
Gow, Ian


Biffen, Rt Hon John
Greenway, Harry


Biggs-Davison, Sir John
Griffiths, E. (B'y St. Edm'ds)


Blackburn, John
Griffiths, Peter Portsm'th N)


Blaker, Peter
Gummer, John Selwyn


Boscawen, Hon Robert
Hamilton, Hon A.


Bottomley, Peter (W'wich W)
Hamilton, Michael (Salisbury)


Bowden, Andrew
Hampson, Dr Keith


Boyson, Dr Rhodes
Hannam, John


Braine, Sir Bernard
Haselhurst, Alan


Brinton, Tim
Hastings, Stephen


Brittan, Rt. Hon. Leon
Hawkins, Sir Paul


Brooke, Hon Peter
Hawksley, Warren


Brotherton, Michael
Hayhoe, Barney


Browne, John (Winchester)
Heath, Rt Hon Edward


Bruce-Gardyne, John
Heddle, John


Budgen, Nick
Heseltine, Rt Hon Michael


Burden, Sir Frederick
Higgins, Rt Hon Terence L.


Chalker, Mrs. Lynda
Hogg, Hon Douglas (Gr'th'm)


Channon, Rt. Hon. Paul
Holland, Philip (Carlton)


Chapman, Sydney
Hunt, David (Wirral)


Churchill, W. S.
Hunt, John (Ravensbourne)


Clark, Hon A. (Plym'th, S'n)
Irvine, Bryant Godman


Clark, Sir W. (Croydon S)
Irving, Charles (Cheltenham)


Clarke, Kenneth (Rushcliffe)
Jenkln, Rt Hon Patrick


Cockeram, Eric
Jessel, Toby


Cope, John
Johnson Smith, Sir Geoffrey


Cormack, Patrick
Jopling, Rt Hon Michael


Costain, Sir Albert
Kellett-Bowman, Mrs Elaine


Cranborne, Viscount
Kershaw, Sir Anthony


Douglas-Hamilton, Lord J.
Kimball, Sir Marcus


Dover, Denshore
King, Rt Hon Tom


Dunn, Robert (Dartford)
Knox, David


Durant, Tony
Lamont, Norman


Edwards, Rt Hon N. (P'broke)
Lang, Ian


Eggar, Tim
Latham, Michael


Elliott, Sir William
Lawrence, Ivan


Fairgrieve, Sir Russell
Lee, John


Faith, Mrs Sheila
Lester, Jim (Beeston)






Lewis, Kenneth (Rutland)
Scott, Nicholas


Lloyd, Ian (Havant &amp; W'loo)
Shaw, Giles (Pudsey)


Luce, Richard
Shelton, William (Streatham)


Macfarlane, Neil
Shepherd, Richard


MacGregor, John
Shersby, Michael


MacKay, John (Argyll)
Silvester, Fred


Macmillan, Rt Hon M.
Sims, Roger


McNair-Wilson, M. (N'bury)
Skeet, T. H. H.


Madel, David
Smith, Dudley


Major, John
Smith, Tim (Beaconsfield)


Marland, Paul
Speed, Keith


Marten, Rt Hon Neil
Spicer, Jim (West Dorset)


Mawby, Ray
Sproat, Iain


Mawhinney, Dr Brian
Squire, Robin


Maxwell-Hyslop, Robin
Stanbrook, Ivor


Mayhew, Patrick
Stanley, John


Mellor, David
Stevens, Martin


Miller, Hal (B'grove)
Stewart, A. (E Renfrewshire)


Mills, Sir Peter (West Devon)
Stewart, Ian (Hitchin)


Mitchell, David (Basingstoke)
Stokes, John


Moate, Roger
Stradling Thomas, J.


Montgomery, Fergus
Tapsell, Peter


Morris, M. (N'hampton S)
Taylor, Teddy (S'end E)


Morrison, Hon C. (Devizes)
Tebbit, Rt Hon Norman


Morrison, Hon P. (Chester)
Temple-Morris, Peter


Mudd, David
Thatcher, Rt Hon Mrs M.


Murphy, Christopher
Thompson, Donald


Myles, David
Thorne, Neil (Ilford South)


Needham, Richard
Thornton, Malcolm


Nelson, Anthony
Townend, John (Bridlington)


Neubert, Michael
Townsend, Cyril D, (B'heath)


Newton, Tony
Trippier, David


Nott, Rt Hon John
Trotter, Neville


Onslow, Cranley
van Straubenzee, Sir W.


Osborn, John
Vaughan, Dr Gerard


Page, John (Harrow, West)
Viggers, Peter


Parris, Matthew
Waddington, David


Patten, John (Oxford)
Wakeham, John


Pattie, Geoffrey
Waller, Gary


Pawsey, James
Walters, Dennis


Percival, Sir Ian
Ward, John


Peyton, Rt Hon John
Warren, Kenneth


Pink, R. Bonner
Watson, John


Pollock, Alexander
Wells, Bowen


Porter, Barry
Wheeler, John


Price, Sir David (Eastleigh)
Whitelaw, Rt Hon William


Raison, Rt Hon Timothy
Whitney, Raymond


Rathbone, Tim
Wickenden, Keith


Rees, Peter (Dover and Deal)
Wiggin, Jerry


Rees-Davies, W. R.
Wilkinson, John


Rhys Williams, Sir Brandon
Winterton, Nicholas


Ridley, Hon Nicholas
Wolfson, Mark


Ridsdale, Sir Julian
Young, Sir George (Acton)


Roberts, M. (Cardiff NW)



Roberts, Wyn (Conway)
Tellers for the Ayes:


Rossi, Hugh
Mr. Anthony Berry and


Rost, Peter
Mr. Carol Mather.


Rumbold, Mrs A. C. R.



NOES



Allaun, Frank
Campbell-Savours, Dale


Alton, David
Canavan, Dennis


Archer, Rt Hon Peter
Cant, R. B.


Atkinson, N.(H'gey,)
Carmichael, Neil


Bagier, Gordon A.T.
Carter-Jones, Lewis


Barnett, Guy (Greenwich)
Clark, Dr David (S Shields)


Barnett, Rt Hon Joel (H'wd)
Clarke, Thomas C'b'dge, A'rie


Beith, A. J.
Cocks, Rt Hon M. (B'stol S)


Benn, Rt Hon Tony
Cohen, Stanley


Bennett, Andrew (St'kp't N)
Coleman, Donald


Bidwell, Sydney
Cook, Robin F.


Bottomley, Rt Hon A.(M'b'ro)
Cowans, Harry


Bradley, Tom
Craigen, J. M. (G'gow, M'hill)


Brown, Hugh D. (Provan)
Crawshaw, Richard


Brown, R. C. (N'castle W)
Crowther, Stan


Buchan, Norman
Cryer, Bob




Cunliffe, Lawrence
Martin, M (G'gow S'burn)


Cunningham, G. (Islington S)
Maxton, John


Dalyell, Tam
Maynard, Miss Joan


Davis, Clinton (Hackney C)
Meacher, Michael


Davis, Terry (B'ham, Stechf'd)
Millan, Rt Hon Bruce


Deakins, Eric
Mitchell, Austin (Grimsby)


Dean, Joseph (Leeds West)
Morris, Rt Hon A. (W'shawe)


Dewar, Donald
Morris, Rt Hon C. (O'shaw)


Dixon, Donald
Morton, George


Dobson, Frank
Moyle, Rt Hon Roland


Dormand, Jack
Newens, Stanley


Douglas, Dick
O'Neill, Martin


Dubs, Alfred
Orme, Rt Hon Stanley


Duffy, A. E. P.
Owen, Rt Hon Dr David


Dunwoody, Hon Mrs G.
Palmer, Arthur


Eadie, Alex
Park, George


Eastham, Ken
Parry, Robert


Edwards, R. (W'hampt'n S E)
Pendry, Tom


Ellis, R. (NE D'bysh're)
Penhaligon, David


Ellis, Tom (Wrexham)
Price, C. (Lewisham W)


English, Michael
Radice, Giles


Ennals, Rt Hon David
Rees, Rt Hon M (Leeds S)


Faulds, Andrew
Richardson, Jo


Flannery, Martin
Roberts, Albert (Normanton)


Fletcher, Ted (Darlington)
Roberts, Gwilym (Cannock)


Ford, Ben
Robertson, George


Forrester, John
Robinson, G. (Coventry NW)


Foster, Derek
Rooker, J. W.


Foulkes, George
Roper, John


Freud, Clement
Ross, Ernest (Dundee West)


Garrett, John (Norwich S)
Ross, Stephen (Isle of Wight)


Garrett, W. E. (Wallsend)
Sever, John


Golding, John
Sheerman, Barry


Gourlay, Harry
Sheldon, Rt Hon R.


Graham, Ted
Shore, Rt Hon Peter


Grimond, Rt Hon J.
Short, Mrs Renée


Hamilton, James (Bothwell)
Silkin, Rt Hon J. (Deptford)


Hamilton, W. W. (C'tral Fife)
Silverman, Julius


Hardy, Peter
Skinner, Dennis


Harrison, Rt Hon Walter
Smith, Cyril (Rochdale)


Hattersley, Rt Hon Roy
Soley, Clive


Haynes, Frank
Spriggs, Leslie


Healey, Rt Hon Denis
Stallard, A. W.


Heffer, Eric S.
Steel, Rt Hon David


Hogg, N. (E Dunb't'nshire)
Stewart, Rt Hon D. (W Isles)


Home Robertson, John
Stoddart, David


Hooley, Frank
Strang, Gavin


Horam, John
Straw, Jack


Hoyle, Douglas
Summerskill, Hon Dr Shirley


Huckfield, Les
Taylor, Mrs Ann (Bolton W)


Hughes, Mark (Durham)
Thomas, Dafydd (Merioneth)


Hughes, Robert (Aberdeen N)
Thorne, Stan (Preston South)


Hughes, Roy (Newport)
Torney, Tom


Jay, Rt Hon Douglas
Urwin, Rt Hon Tom


Jenkins, Rt Hon Roy (Hillh'd)
Wainwright, E. (Dearne V)


John, Brynmor
Wainwright, R. (Colne V)


Johnson, James (Hull West)
Wellbeloved, James


Jones, Rt Hon Alec (Rh'dda)
Welsh, Michael


Kaufman, Rt Hon Gerald
Whitehead, Phillip


Lamond, James
Whitlock, William


Leadbitter, Ted
Wigley, Dafydd


Leighton, Ronald
Willey, Rt Hon Frederick


Lewis, Ron (Carlisle)
Williams, Rt Hon A. (S'sea W)


Litherland, Robert
Wilson, Gordon (Dundee E)


Lofthouse, Geoffrey
Winnick, David


Lyons, Edward (Bradf'd W)
Woodall, Alec


Mabon, Rt Hon Dr J. Dickson
Woolmer, Kenneth


McCartney, Hugh
Wrigglesworth, Ian


McDonald, Dr Oonagh
Wright, Sheila


McElhone, Frank
Young, David (Bolton E)


MacKenzie, Rt Hon Gregor



McNally, Thomas
Tellers for the Noes:


Marks, Kenneth
Mr. Allen McKay and


Marshall, Jim (Leicester S)
Dr. Edmund Marshall.

Division No. 269]
[8.05 pm


AYES


Abse, Leo
Cartwright, John


Adams, Allen
Clark, Dr David (S Shields)


Allaun, Frank
Clarke, Thomas C'b'dge,A'rie


Alton, David
Cocks, Rt Hon M. (B'stol S)


Anderson, Donald
Cohen, Stanley


Archer, Rt Hon Peter
Coleman, Donald


Ashley, Rt Hon Jack
Concannon, Rt Hon J. D.


Ashton, Joe
Cook, Robin F.


Atkinson, N.(H'gey,)
Cormack, Patrick


Bagier, Gordon A.T.
Cowans, Harry


Barnett, Guy (Greenwich)
Cox, T. (W'dsw'th, Toot'g)


Barnett, Rt Hon Joel (H'wd)
Craigen, J. M. (G'gow, M'hill)


Beith, A. J.
Crawshaw, Richard


Benn, Rt Hon Tony
Critchley, Julian


Bennett, Andrew (St'kp't N)
Crouch, David


Benyon, Thomas (A'don)
Crowther, Stan


Booth, Rt Hon Albert
Cryer, Bob


Boothroyd, Miss Betty
Cunliffe, Lawrence


Bottomley, Rt Hon A. (M'b'ro)
Cunningham, G. (Islington S)


Bradley, Tom
Cunningham, Dr J. (W'h'n)


Bray, Dr Jeremy
Dalyell, Tam


Brocklebank-Fowler, C.
Davidson, Arthur


Brown, Hugh D. (Provan)
Davies, Rt Hon Denzil (L'lli)


Brown, R. C. (N'castle W)
Davis, Clinton (Hackney C)


Brown, Ronald W. (H'ckn'y S)
Davis, Terry (B'ham, Stechf'd)


Brown, Ron (E'burgh, Leith)
Deakins, Eric


Buchan, Norman
Dean, Joseph (Leeds West)


Callaghan, Rt Hon J.
Dewar, Donald


Callaghan, Jim (Midd't'n &amp; P)
Dixon, Donald


Campbell, Ian
Dobson, Frank


Campbell-Savours, Dale
Dormand, Jack


Canavan, Dennis
Dorrell, Stephen


Cant, R. B.
Douglas, Dick


Carmichael, Neil
Dubs, Alfred


Carter-Jones, Lewis
Duffy, A. E. P.





Dunnett, Jack
Mabon, Rt Hon Dr J. Dickson


Dunwoody, Hon Mrs G.
McCartney, Hugh


Eadie, Alex
McDonald, Dr Oonagh


Eastham, Ken
McElhone, Frank


Edwards, R. (W'hampt'n S E)
McGuire, Michael (Ince)


Ellis, R. (NE D'bysh're)
McKelvey, William


Ellis, Tom (Wrexham)
MacKenzie, Rt Hon Gregor


English, Michael
Maclennan, Robert


Ennals, Rt Hon David
McMahon, Andrew


Evans, loan (Aberdare)
McNally, Thomas


Evans, John (Newton)
McNamara, Kevin


Ewing, Harry
McTaggart, Robert


Faulds, Andrew
McWilliam, John


Field, Frank
Madel, David


Fitch, Alan
Magee, Bryan


Flannery, Martin
Marks, Kenneth


Fletcher, Ted (Darlington)
Marshall, D (G'gow S'ton)


Foot, Rt Hon Michael
Marshall, Dr Edmund (Goole)


Ford, Ben
Marshall, Jim (Leicester S)


Forrester, John
Martin, M (G'gow S'burn)


Foster, Derek
Mason, Rt Hon Roy


Foulkes, George
Maxton, John


Fraser, J. (Lamb'th, N'w'd)
Maynard, Miss Joan


Freeson, Rt Hon Reginald
Meacher, Michael


Freud, Clement
Mellish, Rt Hon Robert


Garrett, John (Norwich S)
Mikardo, Ian


Garrett, W. E. (Wallsend)
Millan, Rt Hon Bruce


Ginsburg, David
Miller, Dr M. S. (E Kilbride)


Golding, John
Mitchell, Austin (Grimsby)


Gourlay, Harry
Mitchell, R. C. (Soton Itchen)


Graham, Ted
Morris, Rt Hon A. (W'shawe)


Grant, John (Islington C)
Morris, Rt Hon C. (O'shaw)


Grimond, Rt Hon J.
Morrison, Hon C. (Devizes)


Hamilton, James (Bothwell)
Moyle, Rt Hon Roland


Hamilton, W. W. (C'tral Fife)
Needham, Richard


Hardy, Peter
Newens, Stanley


Harrison, Rt Hon Walter
Oakes, Rt Hon Gordon


Hart, Rt Hon Dame Judith
Ogden, Eric


Haselhurst, Alan
O'Halloran, Michael


Hattersley, Rt Hon Roy
O'Neill, Martin


Haynes, Frank
Orme, Rt Hon Stanley


Healey, Rt Hon Denis
Owen, Rt Hon Dr David


Heffer, Eric S.
Palmer, Arthur


Hicks, Robert
Park, George


Hogg, N. (E Dunb't'nshire)
Parker, John


Holland, S. (L'b'th, Vauxh'll)
Parry, Robert


Home Robertson, John
Pavitt, Laurie


Homewood, William
Pendry, Tom


Hooley, Frank
Penhaligon, David


Horam, John
Pitt, William Henry


Howell, Rt Hon D.
Powell, Rt Hon J.E. (S Down)


Howells, Geraint
Powell, Raymond (Ogmore)


Hoyle, Douglas
Prescott, John


Huckfield, Les
Price, C. (Lewisham W)


Hudson Davies, Gwilym E.
Race, Reg


Hughes, Mark (Durham)
Radice, Giles


Hughes, Robert (Aberdeen N)
Rees, Rt Hon M (Leeds S)


Hughes, Roy (Newport)
Rhys Williams, Sir Brandon


Janner, Hon Greville
Richardson, Jo


Jay, Rt Hon Douglas
Roberts, Albert (Normanton)


Jenkins, Rt Hon Roy (Hillh'd)
Roberts, Allan (Bootle)


John, Brynmor
Roberts, Ernest (Hackney N)


Johnson, James (Hull West)
Roberts, Gwilym (Cannock)


Johnson, Walter (Derby S)
Robertson, George


Jones, Rt Hon Alec (Rh'dda)
Robinson, G. (Coventry NW)


Jones, Barry (East Flint)
Rodgers, Rt Hon William


Kaufman, Rt Hon Gerald
Rooker, J. W.


Kilroy-Silk, Robert
Roper, John


Kinnock, Neil
Ross, Ernest (Dundee West)


Knox, David
Ross, Stephen (Isle of Wight)


Lambie, David
Ross, Wm. (Londonderry)


Lamond, James
Rowlands, Ted


Leadbitter, Ted
Ryman, John


Leighton, Ronald
Sever, John


Lester, Jim (Beeston)
Sheerman, Barry


Lestor, Miss Joan
Sheldon, Rt Hon R.


Lewis, Ron (Carlisle)
Shore, Rt Hon Peter


Litherland, Robert
Short, Mrs Renée


Lofthouse, Geoffrey
Silkin, Rt Hon J. (Deptford)


Lyons, Edward (Bradf'd W)
Silkin, Rt Hon S. C. (Dulwich)






Silverman, Julius
Wainwright, E. (Dearne V)


Skinner, Dennis
Wainwright, R. (Colne V)


Smith, Cyril (Rochdale)
Walker, Rt Hon H. (D'caster)


Smith, Rt Hon J. (N Lanark)
Walters, Dennis


Soley, Clive
Weetch, Ken


Spearing, Nigel
Wellbeloved, James


Spriggs, Leslie
Welsh, Michael


Squire, Robin
White, Frank R.


Stallard, A. W.
White, J. (G'gow Pollok)


Steel, Rt Hon David
Whitehead, Phillip


Stewart, Rt Hon D. (W Isles)
Whitlock, William


Stoddart, David
Wigley, Dafydd


Stott, Roger
Willey, Rt Hon Frederick


Strang, Gavin
Williams, Rt Hon A. (S'sea W)


Straw, Jack
Williams, Rt Hon Mrs (Crosby)


Summerskill, Hon Dr Shirley
Wilson, Gordon (Dundee E)


Tapsell, Peter
Wilson, Rt Hon Sir H. (H'ton)


Taylor, Mrs Ann (Bolton W)
Wilson, William (C'try SE)


Thomas, Dafydd (Merioneth)
Winnick, David


Thomas, Jeffrey (Abertillery)
Woodall, Alec


Thomas, Dr R. (Carmarthen)
Woolmer, Kenneth


Thorne, Stan (Preston South)
Wrigglesworth, Ian


Tilley, John
Wright, Sheila


Tinn, James
Young, David (Bolton E)


Torney, Tom



Townsend, Cyril D, (B'heath)
Tellers for the Ayes:


Urwin, Rt Hon Tom
Mr. Allen McKay and


van Straubenzee, Sir W.
Mr. George Morton.


Varley, Rt Hon Eric G.



NOES


Adley, Robert
Carlisle, Kenneth (Lincoln)


Aitken, Jonathan
Carlisle, Rt Hon M. (R'c'n)


Alexander, Richard
Chalker, Mrs. Lynda


Alison, Rt Hon Michael
Channon, Rt. Hon. Paul


Amery, Rt Hon Julian
Chapman, Sydney


Ancram, Michael
Churchill, W. S.


Arnold, Tom
Clark, Hon A. (Plym'th, S'n)


Aspinwall, Jack
Clark, Sir W. (Croydon S)


Atkins, Rt Hon H.(S'thorne)
Clarke, Kenneth (Rushcliffe)


Atkins, Robert (Preston N)
Clegg, Sir Walter


Atkinson, David (B'm'th,E)
Cockeram, Eric


Baker, Kenneth(St.M'bone)
Colvin, Michael


Baker, Nicholas (N Dorset)
Cope, John


Banks, Robert
Corrie, John


Beaumont-Dark, Anthony
Costain, Sir Albert


Bendall, Vivian
Cranborne, Viscount


Bennett, Sir Frederic (T'bay)
Dickens, Geoffrey


Benyon, W. (Buckingham)
Douglas-Hamilton, Lord J.


Best, Keith
Dover, Denshore


Bevan, David Gilroy
du Cann, Rt Hon Edward


Biffen, Rt Hon John
Dunn, Robert (Dartford)


Biggs-Davison, Sir John
Durant, Tony


Blackburn, John
Eden, Rt Hon Sir John


Blaker, Peter
Edwards, Rt Hon N. (P'broke)


Body, Richard
Eggar, Tim


Bonsor, Sir Nicholas
Elliott, Sir William


Boscawen, Hon Robert
Emery, Sir Peter


Bottomley, Peter (W'wich W)
Eyre, Reginald


Bowden, Andrew
Fairbairn, Nicholas


Boyson, Dr Rhodes
Fairgrieve, Sir Russell


Braine, Sir Bernard
Faith, Mrs Sheila


Bright, Graham
Farr, John


Brinton, Tim
Fell, Sir Anthony


Brittan, Rt. Hon. Leon
Fenner, Mrs Peggy


Brooke, Hon Peter
Finsberg, Geoffrey


Brotherton, Michael
Fisher, Sir Nigel


Brown, Michael (Brigg &amp; Sc'n)
Fletcher, A. (Ed'nb'gh N)


Browne, John (Winchester)
Fletcher-Cooke, Sir Charles


Bruce-Gardyne, John
Fookes, Miss Janet


Bryan, Sir Paul
Forman, Nigel


Buchanan-Smith, Rt. Hon. A.
Fowler, Rt Hon Norman


Buck, Antony
Fox, Marcus


Budgen, Nick
Fraser, Rt Hon Sir Hugh


Bulmer, Esmond
Fraser, Peter (South Angus)


Burden, Sir Frederick
Fry, Peter


Butcher, John
Gardiner, George (Reigate)


Butler, Hon Adam
Gardner, Edward (S Fylde)


Cadbury, Jocelyn
Garel-Jones, Tristan


Carlisle, John (Luton West)
Glyn, Dr Alan





Goodhart, Sir Philip
Moate, Roger


Goodhew, Sir Victor
Monro, Sir Hector


Goodlad, Alastair
Montgomery, Fergus


Gorst, John
Moore, John


Gow, Ian
Morris, M. (N'hampton S)


Gower, Sir Raymond
Morrison, Hon P. (Chester)


Grant, Anthony (Harrow C)
Mudd, David


Gray, Hamish
Murphy, Christopher


Greenway, Harry
Myles, David


Grieve, Percy
Neale, Gerrard


Griffiths, E. (B'y St. Edm'ds)
Nelson, Anthony


Griffiths, Peter Portsm'th N)
Neubert, Michael


Grylls, Michael
Newton, Tony


Gummer, John Selwyn
Normanton, Tom


Hamilton, Hon A.
Nott, Rt Hon John


Hamilton, Michael (Salisbury)
Onslow, Cranley


Hampson, Dr Keith
Oppenheim, Rt Hon Mrs S.


Hannam,John
Osborn, John


Hastings, Stephen
Page, John (Harrow, West)


Havers, Rt Hon Sir Michael
Page, Richard (SW Herts)


Hawkins, Sir Paul
Parkinson, Rt Hon Cecil


Hawksley, Warren
Parris, Matthew


Hayhoe, Barney
Patten, John (Oxford)


Heath, Rt Hon Edward
Pattie, Geoffrey


Heddle, John
Pawsey, James


Henderson, Barry
Percival, Sir Ian


Heseltine, Rt Hon Michael
Peyton, Rt Hon John


Higgins, Rt Hon Terence L.
Pink, R. Bonner


Hill, James
Pollock, Alexander


Hogg, Hon Douglas (Gr'th'm)
Porter, Barry


Holland, Philip (Carlton)
Prentice, Rt Hon Reg


Hooson, Tom
Price, Sir David (Eastleigh)


Hordern, Peter
Prior, Rt Hon James


Howe, Rt Hon Sir Geoffrey
Proctor, K. Harvey


Howell, Rt Hon D. (G'ldf'd)
Pym, Rt Hon Francis


Howell, Ralph (N Norfolk)
Raison, Rt Hon Timothy


Hunt, David (Wirral)
Rathbone, Tim


Hurd, Rt Hon Douglas
Rees, Peter (Dover and Deal)


Irvine, Bryant Godman
Rees-Davies, W. R.


Irving, Charles (Cheltenham)
Renton, Tim


Jenkin, Rt Hon Patrick
Ridley, Hon Nicholas


Jessel, Toby
Ridsdale, Sir Julian


Johnson Smith, Sir Geoffrey
Rifkind, Malcolm


Jopling, Rt Hon Michael
Rippon, Rt Hon Geoffrey


Joseph, Rt Hon Sir Keith
Roberts, M. (Cardiff NW)


Kaberry, Sir Donald
Roberts, Wyn (Conway)


Kellett-Bowman, Mrs Elaine
Rossi, Hugh


Kershaw, Sir Anthony
Rost, Peter


Kimball, Sir Marcus
Royle, Sir Anthony


King, Rt Hon Tom
Rumbold, Mrs A. C. R.


Knight, Mrs Jill
Sainsbury, Hon Timothy


Lamont, Norman
St. John-Stevas, Rt Hon N.


Lang, Ian
Scott, Nicholas


Latham, Michael
Shaw, Giles (Pudsey)


Lawrence, Ivan
Shelton, William (Streatham)


Lawson, Rt Hon Nigel
Shepherd, Colin (Hereford)


Lee, John
Shepherd, Richard


Le Marchant, Spencer
Shersby, Michael


Lennox-Boyd, Hon Mark
Silvester, Fred


Lloyd, Ian (Havant &amp; W'loo)
Sims, Roger


Lloyd, Peter (Fareham)
Skeet, T. H. H.


Loveridge, John
Smith, Dudley


Luce, Richard
Smith, Tim (Beaconsfield)


Lyell, Nicholas
Speed, Keith


Macfarlane, Neil
Speller, Tony


MacGregor, John
Spence, John


MacKay, John (Argyll)
Spicer, Jim (West Dorset)


McNair-Wilson, M. (N'bury)
Spicer, Michael (S Worcs)


McNair-Wilson, P. (New F'st)
Sproat, Iain


Major, John
Stainton, Keith


Marland, Paul
Stanbrook, Ivor


Marten, Rt Hon Neil
Stanley, John


Maude, Rt Hon Sir Angus
Steen, Anthony


Mawby, Ray
Stevens, Martin


Mawhinney, Dr Brian
Stewart, A. (E Renfrewshire)


Mayhew, Patrick
Stewart, Ian (Hitchin)


Mellor, David
Stokes, John


Mills, Iain (Meriden)
Stradling Thomas, J.


Mills, Sir Peter (West Devon)
Taylor, Teddy (S'end E)


Mitchell, David (Basingstoke)
Tebbit, Rt Hon Norman






Temple-Morris, Peter
Watson, John


Thatcher, Rt Hon Mrs M.
Wells, Bowen


Thomas, Rt Hon Peter
Wells, John (Maidstone)


Thompson, Donald
Wheeler, John


Thorne, Neil (Ilford South)
Whitelaw, Rt Hon William


Thornton, Malcolm
Whitney, Raymond


Townend, John (Bridlington)
Wickenden, Keith


Trippier, David
Wiggin, Jerry


Trotter, Neville
Wilkinson, John


Vaughan, Dr Gerard
Williams, D.(Montgomery)


Viggers, Peter
Winterton, Nicholas


Waddington, David
Wolfson, Mark


Wakeham, John
Young, Sir George (Acton)


Waldegrave, Hon William
Younger, Rt Hon George


Walker, Rt Hon P.(W'cester)



Walker, B. (Perth)
Tellers for the Noes:


Waller, Gary
Mr. Anthony Berry and


Ward, John
Mr. Carol Mather.


Warren, Kenneth

Question accordingly negatived.

Mr. Peter Shore: We have had a remarkable vote, one of the closest votes certainly in this Parliament, and certainly on this Finance Bill.

Mr. Straw: The closest vote.

Mr. Shore: Indeed, the closest vote in the whole of this Parliament. The vote was on a matter on which the House of Commons was ranged against the Executive. I should like to think that the Chancellor of the Exchequer, who again is an absentee from the House and, if not, the Chief Secretary, will consider carefully the meaning of the vote and the fact that 44 members of his own party have voted against the Government. I hope that he will be prepared to come to the House again and tell us when he intends to honour the implicit commitment to make good the 5 per cent.

Clause 37

SHARE OPTIONS

The Financial Secretary to the Treasury (Mr. Nicholas Ridley): I beg to move amendment No. 58, in page 32, line 15, after 'which', insert
', subject to subsection (1A) below,'.

Mr. Speaker: With this we may take Government amendments Nos. 59 to 61.

Mr. Ridley: It might be for the convenience of the House if we were to discuss also Government amendment No. 62, and amendment No. 63, in page 32, line 31, leave out 'thirty days' and insert 'one year.'.

Mr. Speaker: If there is no objection to that, so be it.

Mr. Ridley: The amendments are four minor relieving provisions to the clause, which deals with the option of spreading the tax on the exercise of a share option over a three-year period. I believe that they raise no issues of substance. I hope that the House will accept them.

Amendment agreed to.

Amendments made: No. 59, in page 32, line 18, leave out 'obtained' and insert 'granted'.

No. 60, in page 32, line 18, leave out 'and' and insert 'or, if the right was granted before 6 April 1982, 90 per cent. of that market value; and'.

No. 61, in page 32, line 29, at end insert—
'(1A) Shares which are acquired for a consideration less than that required by paragraph (b) of subsection (1) above by reason only of a diminution in the market value of shares of that class

(determined as aforesaid) which is attributable solely to the share capital of the company issuing the shares being varied after the right to acquire the shares was granted, shall for the purpose of that paragraph be regarded as having been acquired for a consideration not less than that required by that paragraph.'.

No. 62, in page 32, line 31, leave out 'thirty' and insert sixty'.—[Mr. Ridley.]

Clause 40

BENEFITS IN KIND: VOUCHERS

The Chief Secretary of the Treasury (Mr. Leon Brittan): I beg to move amendment No. 64, in line 18, leave out from 'which' to end of line 20 and insert
'the voucher is handed over in exchange for money, goods or services (a voucher which is posted being treated as handed over at the time of posting).'
This is a technical amendment that concerns the date on which an employee who uses a cheque voucher is deemed to secure a benefit. The words deleted tie the benefit to the obtaining of money, goods or services. The amendment ties it to the tendering or the posting of the cheque. There can be only one date on which a cheque is tendered or posted and the amendment is designed to avoid possible doubt or difficulty about the date on which a charged tax arises. I commend the amendment to the House.

Amendment agreed to.

Mr. Cook: I beg to move amendment No. 65, in page 35, line 34, after '1982' insert
'former employees of a passenger transport undertaking under arrangements in operation on 31st December 1969 or'.

Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to take amendment No. 66, in page 35, line 37, at end insert—
'(aa) his former employer'.

Mr. Cook: The origins of the amendment go back to last year when the Committee debated the provision in the Finance Bill to bring transport vouchers within tax. As a result of representations from the Opposition, the Chief Secretary gave a commitment on Report to protect employees of British Rail and other transport undertakings from the effect of the change in the law so that the traditional arrangements by which those concessions were not liable to tax were preserved. We are grateful to the Chief Secretary for honouring that commitment in this year's Finance Bill.
Since the matter was considered in Committee—when we passed the clause that gave effect to last year's undertaking—it has emerged that a small group of people who previously benefited from the traditional tax arrangement will apparently be outwith the scope of the clause as drafted. They are former employees of British Rail who have been transferred to other transport undertakings that have been created by Act of Parliament. The most obvious is the National Freight Corporation. Many former employees of British Rail were transferred to the NFC when it was set up, especially National Carriers. A smaller group of people are employed by other transport undertakings—for example, the docks. All are in the public sector and all were set up by legislation. In every case, the employees were transferred from British Rail to their new employer by an Act of Parliament, not by their own actions. The employees did not choose to change their employers. Although they continued to work


at the same place and do the same job, by a change in the law, they discovered that their employers had been changed from one public sector undertaking to another.
Anyone who has been recruited by those companies in the past 13 years is not eligible for any transport concession from British Rail. Only those who were employees of British Rail in the late 1960s, when the new arrangement was created, obtain travel concessions. As part of the transfer arrangements and to ensure that there was no worsening of conditions, those employees continued to enjoy the same transport concessions as employees of British Rail.
As a result of the drafting of the clause, such employees will now be liable to tax on the travel concession, although their former colleagues in British Rail who have remained in its employ will not be liable to tax on the same transport concession. It is unclear how those who were not liable to tax under the previous arrangement should now, under the clause as drafted, be brought within the scope of tax.
I hope that the Chief Secretary will say that this anomaly is the result of an oversight—that those people have been forgotten 13 years after being transferred from British Rail to another employer. I hope that, if he cannot accept the amendment, he will accept the principle of our anxiety and ensure that they will be protected from tax on a concession on which other employees of transport undertakings will not be taxed.

Mr. Brittan: I was aware of the concern of the hon. Member for Edinburgh, Central (Mr. Cook) before he tabled the amendment, as representations on these lines had been made. As the hon. Gentleman was good enough to say, we have honoured the undertaking that I gave in Standing Committee on last year's Finance Bill, and naturally I wanted to consider carefully whether the principle embodied in the change enacted pursuant to that undertaking required or necessitated the hon. Gentleman's further amendment.
I must tell the hon. Gentleman that I do not accept his argument in this instance. Last year's Bill contained a provision to ensure that, when employers bought season tickets for their employees, the cost of those tickets should be assessable as a benefit to the employee. That was generally accepted to be right.
On Report last year, the hon. Member for Edinburgh, Central himself said:
We accept that it is right and proper that if an employer furnishes a transport voucher to his employees to enable them to buy season tickets for use on the railways, it is proper that the employees should be taxed on the benefit in kind that they receive as a result.
That seems a generally acceptable principle. He went on to explain that the official Opposition had not challenged the clause in Committee because they understood that it did not disturb the basis of assessment laid down in the 1975 (No. 2) Act,
that the employee will be taxed by an amount equal to the expense incurred by the person providing the voucher.—[Official Report, 15 July 1981; Vol. 8, c. 1318.]
The whole argument about transport undertakings was on the basis that it was difficult in cases such as British Rail to establish that any real cost at all was incurred by the employer in providing travel concessions for its own employees. In the course of that debate, I said that the Inland Revenue was examining the argument that British Rail incurred no expense in providing privilege travel

concessions for its employees. In the event, the Inland Revenue—I wholly concur with its conclusions—was not persuaded that the argument was valid. None the less, to fulfil my promise not to disturb the status quo in relation to British Rail, the relevant provision was introduced in the Bill.
There was never any question, however, of extending such an exemption to employees of bodies which actually made payments for travel concessions.

Mr. Cook: rose—

Mr. Brittan: If the hon. Gentleman will contain himself for a moment, I am sure that he will have the opportunity to intervene at the appropriate moment. I have not yet reached the nub of the argument, although the hon. Gentleman, with his customary acuity, has no doubt anticipated it well in advance.
There was never any question of extending such an exemption to employees of bodies which actually made a payment to a transport undertaking to secure travel concessions and I can see no justification, consonant with the principle on which we have operated, for extending exemption to those whose free or cheaper travel has been paid for. The hon. Gentleman himself accepts the principle that the measure of the benefit should be the amount of expense incurred by the person providing the benefit.
A limited group of people who have been receiving benefit may now find that they have to pay a tax which they would otherwise not have been obliged to pay, but we cannot really envisage people carrying a tax exemption with them as a portmanteau donation for the rest of their lives, or even for the rest of their working lives. The normal incidence of tax changes which are justifiable on the ordinary principles of tax, and on the principle which the hon. Gentleman has agreed is appropriate, must therefore apply. Whether or not, as a result of any adverse effect on the total financial position of the people affected, there are grounds for any other adjustments of their general emoluments is a matter not for revenue law, nor for the House, nor indeed for the Government on this occasion. Therefore, the principle that we could not accept, but for which I see a case, has been fully honoured by the propositions that we put forward. I cannot go further and accept the hon. Gentleman's amendment.

Amendment negatived.

Clause 42

BENEFITS IN KIND: CARS AND CAR FUEL

Mr. Robert Sheldon: I beg to move amendment No. 67, in page 39, line 15 leave out subsection (6).
We are on the old familiar territory of benefits in kind and considering an extension of them to cover access to motor cars. In this case we are dealing with fuel. Under the existing legislation no benefits in kind are held to obtain from the provision by the employer of fuel. That loophole has existed for some time and the Government have now rightly brought forward this legislation, but unfortunately they are proposing a change in the period of introduction from 1983–84 to 1984–85. It is not easy to see why there is a need for such delay in this important matter.
The problem with which the House is concerned is the entire operation of benefits in kind as they apply to the provision of motor cars. For a long time the scale charges


have been hopelessly under-estimated compared with other benefits in kind. As the benefits in kind are in essence identical to some of the schedules of charges for the benefits in kind of motor cars, perhaps I can refer to the scale of motor car benefits in kind.
The Automobile Association produces a technical services leaflet in the spring of each year. The leaflet, dated April 1982, shows a schedule of the estimated standing and running costs of a motor car. The standing charges include licences, insurance and depreciation and the running costs per mile cover petrol, most importantly, but also oil, tyres and servicing.
If we examine the schedule of engine capacity that ranges from below 1,000 cc to 4,500 cc, the document shows that the cost of running such cars, including standing charges and running costs, ranges from £2,079 a year to £6,048. The scale of charges in the Finance Bill shows that the benefit that is held to arise ranges from £270 to £540. That is £540 against £6,000 and £270 against £2,000. That is an astonishing difference between the benefit in kind as estimated by the Automobile Association and the estimate in our legislation. The Government have examined that legislation in order to assess the benefits in kind of the fuel charge. They have gone straight to schedule 7 of the Finance Act 1976 as it has been updated, taken those figures and said that that should be the benefit in kind for fuel. Schedule 7 contains a range of figures in tables A and B. It is hard to see how that relates to the cost of petrol because we are dealing with 1984–85 and the assessment of benefit will occur two years from now. It will be difficult to say how much benefit will be derived from the provision of petrol by the company. Why has there been such a delay?
Britain's problem is that it has the largest number of company-owned cars. Other countries do not have the same system of company-owned cars, which are an inducement to recruitment and to retention of staff. When the Government came to office they believed that the perks provided by companies to their employees would decline as taxation declined. They believed that the provision of perks was a direct consequence of high taxation, so they provided benefits that would avoid the high taxation that was then prevalent. However, although the highest rates of taxation have declined, company perks have not so declined. The proportion of company cars is a matter of great concern to those who are not provided with them. They see their neighbours with more modern and better maintained cars, although they may earn the same. That is a cause of great dissatisfaction, and the inability to raise, for taxation purposes, what is held to be an assessable benefit is a matter of some concern.
We tabled the amendment in order to have some clarification. I hope that the right hon. and learned Gentleman will assure the House about the way in which benefits will be increased. If he will change his mind about the date of introduction, perhaps we can avoid a Division.

Mr. Brittan: The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) has rehearsed usefully some considerations of the taxation of this benefit in kind. I hope that I can explain some, if not all, of the points that he raised, because I am sure that he does not wish his amendment to have the effect that it would have if passed.
The postponement was from 1982–83 to 1983–84. The right hon. Gentleman suggested, no doubt inadvertently, that there was a further postponement to 1984–85. Clause 42 shows that section 69(1)(b) is a new provision on car fuel that will not have effect until 1983–84. Accordingly, in subsection (2), 1983–84 should be substituted for 1982–83. I can well understand the right hon. Gentleman being puzzled by the reference in subsection (6) to 1984–85. I hope that I can explain the purpose of that subsection.
The general scheme envisaged was that in the year of the actual introduction of the scales the scale should be provided for in the Finance Bill itself, but that there should be a provision that in the following year a decision could be made as to what the relevant scale should be, if a change was to be made, by order subject to the negative resolution procedure.
8.45 pm
When the matter was originally envisaged to start in 1982–83, the scales were laid down for 1982–83 and resolutions by the negative procedure were the appropriate method to deal with orders which would set out provisions for 1983–84. However, with the change in the year of the actual introduction everything, as it were, slipped forward. The year 1982–83 becomes 1983–84 in clause 42(1)(b) and 1983–84 becomes 1984–85 in clause 42(6). It is simply a procedural matter that ensures that there is proper debate in the first year and for subsequent years it is done by orders.
The right hon. Gentleman asked why there should be deferment. There was opposition by employers to the scheme as it was first announced on the grounds of complexity and administrative cost. It was, therefore, necessary to postpone it to allow preparatory work to be carried out so that the scheme can be implemented in the way proposed. All that has been before the House and discussed. Similarly, the question what the scales should be and the principles that should be applied have been ventilated in the House and in Committee. I did not expect the right hon. Gentleman to seek to engage in a general debate on that, or I should have been prepared to do so. The amendment related simply to the different procedure for establishing what the scale, in years, should be.
I readily confess that the scheme is not without complexity, but I hope that I have assisted the right hon. Gentleman and the House in explaining that we are simply shifting everything forward one year and that no principle is involved.

Mr. Robert Sheldon: I thank the right hon. and learned Gentleman for that explanation. I was anxious about the way in which the period had slipped forward. I note the differences between the new provision for 1983–84, and the provision to vary this by order in 1984–85. I was particularly concerned about what appeared to be a lack of urgency in the introduction of these changes. I look forward to the changes coming from the orders on the scales of benefit. We shall debate these fully in due course. I hope there will be much tighter action by the Government in these matters.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 8

SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY

Mr. Cook: I beg to move amendment No. 68, in page 167, line 44, at end insert
'provided that no certificate issued to an applicant by virtue of this sub-paragraph shall be valid for a longer period than a year.'
The amendment relates to a matter that was debated in Committee but goes back beyond that to the Chancellor's Budget Statement. He said that he wanted to make it easier for those who have recently left school or college to start a business. As reports of the Budget Statement record, that statement was followed by laughter.
It has since emerged that, instead of providing that it should be easier for those who have recently left school or college to start a business, what the Chancellor of the Exchequer had in mind when he made the statement to the House was changing the provision so that young people could enter the building industry on the "lump" rather than as employees of a building contractor.
It is wholly fallacious to pretend that the provision will in any way bring about increased employment among young people—or, for that matter, anybody else—because it will not release one additional penny for added expenditure on construction projects, and will do nothing to remove the sharp reduction in demand in the construction industry that the Government have already engineered. All it will do is to permit young people who have managed to find a toehold in the construction industry to do so from the position of a self-employed small business man operating on the "lump" rather than as the employee of a building contractor.
Since the matter was debated in Committee, several hon. Members will have received a copy of the letter sent by the general secretary of the Trades Union Congress on 30 June to the Chancellor of the Exchequer, in which Mr. Len Murray makes precisely the same point. It says:
The Committee"—
this was the TUC construction industry committee—
believe that the changes in the tax deduction scheme will have little or no impact on the current levels of unemployment in the industry, much of which is directly related to successive cuts in the level of public sector spending on construction work.
Although the letter came from the TUC, it is worth placing on record that anxiety about the proposal is felt on both sides of industry. The employers and trade unions in the construction industry wrote to every member of the Standing Committee on the Finance Bill to express their concern about the proposal and the extent to which it would undermine the training initiatives and the apprenticeship schemes on which both sides of the construction industry have already agreed.
The matter should be of particular concern to all hon. Members, because the real argument for training in the construction industry does not rest solely on the obvious and very clear importance of ensuring a proper standard of workmanship and the control of quality, but rests on the urgent necessity—which I hope every hon. Member will recognise—to improve the appalling safety record of an industry in which nearly 200 people are killed every year. That was one of the points that the general secretary of the TUC emphasised in his letter to the Chancellor of the Exchequer.
In his letter of a fortnight ago, Mr. Len Murray said that the TUC construction industry committee
were also particularly concerned at the impact the changes in the scheme could have on the already poor health and safety

record in the industry. As you may be aware, construction is one of the most dangerous industries to work in, measured by the number of accidents and fatalities, and recent trends indicate little improvement. The proposed changes will encourage young people with little or no site experience to enter the industry without the benefit of supervision and training, and this in turn must pose a serious threat to health and safety standards within the industry. This threat is not just an increase in risk to the young people themselves, but to other workers on site who may be endangered by the Lack of experience.
We anticipated the letter with the concern that we expressed in the Standing Committee. On that occasion we sought to prevent the Government from inserting the clause as a new clause into their Finance Bill. We were unsuccessful. We failed to sway a sufficient number of the Minister's colleagues to take the view that it was opening the door to workers entering the construction industry without proper training, without proper knowledge of the trade and without proper knowledge of their own safety rules.
Therefore, we have not attempted on this occasion to strike the clause from the Bill. We have adopted what I hope the Financial Secretary will recognise as a more moderate approach, accepting that he has the votes to insist on the clause remaining in the Bill if he wishes to do so. We do not anticipate that, if we were to attempt to remove it, we would achieve a majority even of the small size achieved in the Division a few minutes ago.
We have therefore tabled this amendment, which will have the effect of limiting the length of the certificates to one year at a time. This would enable the Inland Revenue to have regard to the conduct of the person holding the certificate in the previous year before deciding whether to make an annual extension certificate. This is a prudent precaution because of the nature of the certificates.
The 714 certificates are available to those who have worked for three years in the industry. There is therefore an adequate basis in the normal run of cases to assess whether those who apply for the certificates have a good record of tax contributions and an adequate record of activity in the construction industry. Under the clause 714 certificates will become available to people who have no such record of three years work in the construction industry or three years payment of tax to the Inland Revenue.
It would therefore seem appropriate that in this case, and only in this case, there should be the annual bar of the requirement of the annual extension so that over three years the Inland Revenue can consider whether those who obtain the certificates without a previous record of tax payments have, by their conduct in the preceding year or the year before that, demonstrated that they will maintain tax payments through their work in the construction industry.
It is worth referring again to the letter of the general secretary of the TUC, who drew the attention of the Chancellor of the Exchequer to the implications of the scheme for the Inland Revenue and receipt of tax by it. Mr. Murray said:
The removal of certification requirements for school-leavers undermines the scheme, and may encourage unscrupulous individuals within the industry to try to exploit this loop-hole for their own advantage. This may well mean an increase in tax evasion.
I hope that the Financial Secretary will be as anxious as the general secretary of the TUC to prevent tax evasion. Therefore, I hope that he will recognise that we have conceded that he has the clause in the Bill and has


sufficient votes to retain it there. Presumably, the Chancellor has decided not to accede to the request of the TUC to remove the clause. That being the case, the Financial Secretary should, in the spirit of compromise, be willing to accept the amendment which would at least go some way to ensuring that proper control is kept over those who succeed in obtaining a 714 certificate under the provisions of the clause.

Mr. Ridley: I do not think that the hon. Member for Edinburgh, Central (Mr. Cook) will expect me to take this amendment seriously. The suggestion that the certificates should be renewable every year instead of every three years is a concealed way of returning to this subject. Of that I make no complaint, but the hon. Gentleman cannot believe in the amendment. He must know that it would cause a great deal more administrative work and achieve nothing to protect the Inland Revenue. There are already plenty of checks.
The hon. Gentleman said that the general secretary of the TUC, whose letter I have not seen, believes that this is a way of exploiting a loophole. However, the weekly limit of £150 which can be paid to holders of the school leaver certificate without deduction of tax is a guard against evasion. The requirement that a certificate holder must provide a voucher before the contractor pays him without deduction helps even more. The hon. Gentleman will also be aware that Revenue officials check that vouchers are being used correctly before new voucher books are issued. That virtually closes any chance of abuse.
I would prefer these checks not to be necessary, because they circumscribe the opportunities for young men to start up and expand their businesses. These people are not all in their teens. They may be well into their twenties. There is no reason why they should not be allowed to start their own businesses or become self-employed in any industry. It puzzles me that the hon. Member for Edinburgh, Central should seek to prevent them doing so in the construction industry. He put forward the argument about training as if training were a matter for the Inland Revenue. No industry in this country or any country requires that the ability to go into business or training should be determined by tests laid down by the tax authorities.
9 pm
The hon. Member for Edinburgh, Central, the TUC and builders are seeking to put these entrants into the profession at a competitive disadvantage by manipulating the fiscal system. The hon. Gentleman should be ashamed of himself. I am not surprised that employers and unions would like to exclude competition from the industry, but for the hon. Gentleman to have the desire to deny all opportunities for enterprise to young people, and to laugh—and laugh he did—at the possibility of even one person coming off the unemployment register to start his own business, shows the utter cynicism of a party that does nothing but talk about unemployment. The moment that there is a chance of taking one person off the register, that is their reaction.
The true nature of Socialist thinking is "Let us operate a closed shop by any means at our disposal, even by using the tax system as a licence to work." When the Chancellor

introduced this measure in his Budget speech, there was laughter from the Luddite part of the House of which the hon. Member is a distinguished representative.

Mr. Cook: The Financial Secretary is either in urgent need of the July recess or has spent too long over dinner this evening. It is one thing to say that one will not take seriously the TUC or the building industry employers, as he plainly does not. It is another matter to say to the House that he, as a Minister, cannot be expected to take seriously an amendment on the Amendment Paper.
The House has a perfect right to expect every Minister who replies to debates to take seriously any amendment that an hon. Member has troubled to put on the Amendment Paper. It ill becomes the Minister to behave in such a supercilious and arrogant fashion and to pretend that an amendment is beneath his contempt. He draws his salary to take the proceedings of the House seriously. He should not scorn the proceedings of the House.
The laughter on the occasion of the Chancellor's speech was at the utter cynicism and hollowness of his claim that he would provide employment for young people in the construction industry. The Government have done more to destroy employment in the construction industry than any previous Government or any foreign enemy of the British people. I represent a region in which one in four construction workers are currently unemployed. There are more unemployed construction workers in Scotland than there are men employed in the Scottish mining industry, despite its importance to the British economy.
That is the level of devastation that the Government have created. To claim that they will provide employment opportunities in the construction industry deserves derisive laughter. This tawdry scheme does no such thing. It provides for people to enter the construction industry on the lump, rather than become employees of a building contractor. The motivation behind the clause is the hon. Gentleman's atavistic dislike of the system introduced by the Labour Government to control the lump.
The hon. Gentleman knows why the system was introduced. The lump is an abuse of the fiscal system. It is a way to evade tax. His psychological problem is that he cannot get over admiring any group of people who successfully evade the payment of tax. That is his dilemma. However he may try to shrug it off or wish it were otherwise, he now has a responsibility to safeguard the revenue. Instead of doing that, in the clause he is undermining the scheme introduced by the Labour Government because of his spite towards it. [Interruption.] I shall answer the Minister in the way that he answered me. If the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) does not like the answer, he should ensure that he is not represented by Ministers who show the contempt that the Financial Secretary offered us in his answer.
I moved the amendment seriously and I expected the Minister to take it seriously. Both sides of the construction industry requested us to put down the amendment. [Interruption.] The Minister laughs. The contempt that he feels for the TUC and the construction workers whom he has put out of work is plainly what he feels also for the construction employers. The construction industry also expected the Minister to take the amendment seriously. I regret that we put down the amendment in its present form.
It would have been far better to have tabled the standard amendment to leave out the clause and to have voted upon it.

Mr. Ridley: That would have been out of order.

Mr. Cook: No, it would not. If the hon. Gentleman wishes to claim to answer for the Treasury in the House, he should learn the orders of the House. If he looks at the Amendment Paper he will see that other such amendments have been selected, which I suspect he will find himself answering later. If he has not yet looked at the amendments for which I suspect he will be handling the Treasury brief, it demonstrates beyond doubt the contempt with which he takes the Report stage of a Bill for which he is responsible and to which his name is attached.
It came as a shock and an outrage to me to learn that a letter that the TUC general secretary had sent a fortnight ago to the Chancellor of the Exchequer about the matter was not included in the Treasury brief for the Minister. Remarks will be made outside the Chamber about the revelation that either the letter has not been passed to the Minister or has been passed to him but has not been read by him, as he plainly has not read his brief on later amendments.
Had we tabled the amendment to vote against the clause we could have voted against the Minister's vulgar prejudices. But we have this amendment, and after the insult to the House we have no alternative but to vote on it.

Question put, That the amendment be made:—

The House divided: Ayes, 210, Noes 322.

Division No. 270]
[9.07 pm


AYES


Abse, Leo
Cryer, Bob


Adams, Allen
Cunliffe, Lawrence


Allaun, Frank
Cunningham, Dr J. (W'h'n)


Anderson, Donald
Dalyell, Tam


Archer, Rt Hon Peter
Davidson, Arthur


Ashley, Rt Hon Jack
Davis, Clinton (Hackney C)


Ashton, Joe
Davis, Terry (B'ham, Stechf'd)


Atkinson, N. (H'gey,)
Deakins, Eric


Bagier, Gordon A.T.
Dean, Joseph (Leeds West)


Barnett, Guy (Greenwich)
Dewar, Donald


Barnett, Rt Hon Joel (H'wd)
Dixon, Donald


Benn, Rt Hon Tony
Dormand, Jack


Bennett, Andrew (St'kp't N)
Douglas, Dick


Bidwell, Sydney
Dubs, Alfred


Booth, Rt Hon Albert
Duffy, A. E. P.


Boothroyd, Miss Betty
Dunnett, Jack


Bottomley, Rt Hon A. (M'b'ro)
Dunwoody, Hon Mrs G.


Bray, Dr Jeremy
Eadie, Alex


Brown, Hugh D. (Provan)
Eastham, Ken


Brown, Ron (E'burgh, Leith)
Edwards, R. (W'hampt'n S E)


Buchan, Norman
Ellis, R. (NE D'bysh're)


Callaghan, Rt Hon J.
English, Michael


Callaghan, Jim (Midd't'n &amp; P)
Ennals, Rt Hon David


Campbell, Ian
Evans, Ioan (Aberdare)


Campbell-Savours, Dale
Evans, John (Newton)


Canavan, Dennis
Ewing, Harry


Cant, R. B.
Field, Frank


Carmichael, Neil
Fitch, Alan


Carter-Jones, Lewis
Flannery, Martin


Clark, Dr David (S Shields)
Fletcher, Ted (Darlington)


Clarke, Thomas C'b'dge,A'rie
Foot, Rt Hon Michael


Cocks, Rt Hon M. (B'stol S)
Ford, Ben


Cohen, Stanley
Forrester, John


Coleman, Donald
Foulkes, George


Concannon, Rt Hon J. D.
Fraser, J. (Lamb'th, N'w'd)


Cook, Robin F.
Garrett, John (Norwich S)


Cowans, Harry
Garrett, W. E. (Wallsend)


Cox, T. (W'dsw'th, Toot'g)
Golding, John


Craigen, J. M. (G'gow, M'hill)
Gourlay, Harry


Crowther, Stan
Graham, Ted





Hamilton, W. W. (C'tral Fife)
Parry, Robert


Hardy, Peter
Pavitt, Laurie


Harrison, Rt Hon Walter
Pendry, Tom


Hart, Rt Hon Dame Judith
Powell, Raymond (Ogmore)


Hattersley, Rt Hon Roy
Prescott, John


Haynes, Frank
Price, C. (Lewisham W)


Heffer, Eric S.
Race, Reg


Hogg, N. (E Dunb't'nshire)
Radice, Giles


Holland, S. (L'b'th, Vauxh'll)
Rees, Rt Hon M (Leeds S)


Home Robertson, John
Richardson, Jo


Homewood, William
Roberts, Albert (Normanton)


Hooley, Frank
Roberts, Allan (Bootle)


Howell, Rt Hon D.
Roberts, Ernest (Hackney N)


Hoyle, Douglas
Roberts, Gwilym (Cannock)


Huckfield, Les
Robertson, George


Hughes, Mark (Durham)
Robinson, G. (Coventry NW)


Hughes, Robert (Aberdeen N)
Rooker, J. W.


Hughes, Roy (Newport)
Ross, Ernest (Dundee West)


Janner, Hon Greville
Rowlands, Ted


Jay, Rt Hon Douglas
Sever, John


John, Brynmor
Sheerman, Barry


Johnson, James (Hull West)
Sheldon, Rt Hon R.


Jones, Rt Hon Alec (Rh'dda)
Shore, Rt Hon Peter


Jones, Barry (East Flint)
Short, Mrs Renée


Kaufman, Rt Hon Gerald
Silkin, Rt Hon J. (Deptford)


Kerr, Russell
Silverman, Julius


Kilroy-Silk, Robert
Skinner, Dennis


Kinnock, Neil
Smith, Rt Hon J. (N Lanark)


Lambie, David
Soley, Clive


Lamond, James
Spearing, Nigel


Leadbitter, Ted
Spriggs, Leslie


Lestor, Miss Joan
Stallard, A. W.


Lewis, Ron (Carlisle)
Stoddart, David


Litherland, Robert
Stott, Roger


Lofthouse, Geoffrey
Strang, Gavin


McCartney, Hugh
Straw, Jack


McDonald, Dr Oonagh
Summerskill, Hon Dr Shirley


McElhone, Frank
Taylor, Mrs Ann (Bolton W)


McGuire, Michael (Ince)
Thomas, Dafydd (Merioneth)


McKay, Allen (Penistone)
Thomas, Dr R. (Carmarthen)


McKelvey, William
Thorne, Stan (Preston South)


MacKenzie, Rt Hon Gregor
Tilley, John


McNamara, Kevin
Tinn, James


McTaggart, Robert
Torney, Tom


McWilliam, John
Urwin, Rt Hon Tom


Marks, Kenneth
Varley, Rt Hon Eric G.


Marshall, D(G'gow S'ton)
Wainwright, E. (Dearne V)


Marshall, Dr Edmund (Goole)
Walker, Rt Hon H. (D'caster)


Marshall, Jim (Leicester S)
Weetch, Ken


Martin, M(G'gow S'burn)
Welsh, Michael


Mason, Rt Hon Roy
White, Frank R.


Maxton, John
White, J. (G'gow Pollok)


Maynard, Miss Joan
Whitehead, Phillip


Meacher, Michael
Whitlock, William


Millan, Rt Hon Bruce
Wigley, Dafydd


Miller, Dr M. S. (E Kilbride)
Willey, Rt Hon Frederick


Mitchell, Austin (Grimsby)
Wilson, Rt Hon Sir H.(H'ton)


Morris, Rt Hon A. (W'shawe)
Wilson, William (C'try SE)


Morris, Rt Hon C. (O'shaw)
Winnick, David


Morton, George
Woodall, Alec


Moyle, Rt Hon Roland
Woolmer, Kenneth


Newens, Stanley
Wright, Sheila


Oakes, Rt Hon Gordon
Young, David (Bolton E)


O'Neill, Martin



Palmer, Arthur
Tellers for the Ayes:


Park, George
Mr. Derek Foster and


Parker, John
Mr. James Hamilton.


NOES


Adley, Robert
Baker, Kenneth('St.M'bone)


Aitken, Jonathan
Baker, Nicholas (N Dorset)


Alexander, Richard
Banks, Robert


Alison, Rt Hon Michael
Beaumont-Dark, Anthony


Alton, David
Beith, A. J.


Ancram, Michael
Bendall, Vivian


Arnold, Tom
Bennett, Sir Frederic (T'bay)


Aspinwall, Jack
Benyon, Thomas (A'don)


Atkins, Rt Hon H.(S'thorne)
Benyon, W. (Buckingham)


Atkins, Robert(Preston N)
Best, Keith


Atkinson, David (B'm'th.E)
Bevan, David Gilroy






Biffen, Rt Hon John
Glyn, Dr Alan


Biggs-Davison, Sir John
Goodhart, Sir Philip


Blackburn, John
Goodhew, Sir Victor


Blaker, Peter
Goodlad, Alastair


Body, Richard
Gorst, John


Bonsor, Sir Nicholas
Gow, Ian


Boscawen, Hon Robert
Gower, Sir Raymond


Bowden, Andrew
Grant, Anthony (Harrow C)


Boyson, Dr Rhodes
Gray, Hamish


Braine, Sir Bernard
Greenway, Harry


Bright, Graham
Griffiths, E.(B'y St. Edm'ds)


Brinton, Tim
Griffiths, Peter Portsm'th N)


Brittan, Rt. Hon. Leon
Grylls, Michael


Brooke, Hon Peter
Gummer, John Selwyn


Brotherton, Michael
Hamilton, Hon A.


Brown, Michael(Brigg &amp; Sc'n)
Hamilton, Michael (Salisbury)


Browne, John (Winchester)
Hampson, Dr Keith


Bruce-Gardyne, John
Hannam,John


Bryan, Sir Paul
Haselhurst, Alan


Buchanan-Smith, Rt. Hon. A.
Hastings, Stephen


Buck, Antony
Havers, Rt Hon Sir Michael


Budgen, Nick
Hawkins, Sir Paul


Bulmer, Esmond
Hawksley, Warren


Burden, Sir Frederick
Hayhoe, Barney


Butcher, John
Heddle, John


Butler, Hon Adam
Henderson, Barry


Cadbury, Jocelyn
Heseltine, Rt Hon Michael


Carlisle, John (Luton West)
Hicks, Robert


Carlisle, Kenneth (Lincoln)
Higgins, Rt Hon Terence L.


Carlisle, Rt Hon M. (R'c'n)
Hill, James


Cartwright, John
Hogg, Hon Douglas (Gr'th'm)


Chalker, Mrs. Lynda
Holland, Philip (Carlton)


Channon, Rt. Hon. Paul
Hooson, Tom


Chapman, Sydney
Horam, John


Churchill, W. S.
Hordern, Peter


Clark, Hon A. (Plym'th, S'n)
Howell, Rt Hon D. (G'ldf'd)


Clark, Sir W. (Croydon S)
Howell, Ralph (N Norfolk)


Clarke, Kenneth (Rushcliffe)
Howells, Geraint


Clegg, Sir Walter
Hunt, David (Wirral)


Cockeram, Eric
Hunt, John (Ravensbourne)


Colvin, Michael
Hurd, Rt Hon Douglas


Cope, John
Irvine, Bryant Godman


Cormack, Patrick
Irving, Charles (Cheltenham)


Corrie, John
Jenkin, Rt Hon Patrick


Costain, Sir Albert
Jessel, Toby


Cranborne, Viscount
Johnson Smith, Sir Geoffrey


Critchley, Julian
Jopling, Rt Hon Michael


Crouch, David
Joseph, Rt Hon Sir Keith


Cunningham, G. (Islington S)
Kaberry, Sir Donald


Dickens, Geoffrey
Kellett-Bowman, Mrs Elaine


Dorrell, Stephen
Kershaw, Sir Anthony


Douglas-Hamilton, Lord J.
Kimball, Sir Marcus


Dover, Denshore
Knight, Mrs Jill


du Cann, Rt Hon Edward
Knox, David


Durant, Tony
Lamont, Norman


Eden, Rt Hon Sir John
Lang, Ian


Edwards, Rt Hon N. (P'broke)
Latham, Michael


Eggar, Tim
Lawrence, Ivan


Elliott, Sir William
Lee, John


Ellis, Tom (Wrexham)
Lennox-Boyd, Hon Mark


Eyre, Reginald
Lester, Jim (Beeston)


Fairbairn, Nicholas
Lewis, Kenneth (Rutland)


Fairgrieve, Sir Russell
Lloyd, Ian (Havant &amp; W'loo)


Faith, Mrs Sheila
Lloyd, Peter (Fareham)


Farr, John
Loveridge, John


Fell, Sir Anthony
Luce, Richard


Fenner, Mrs Peggy
Lyell, Nicholas


Finsberg, Geoffrey
Lyons, Edward (Bradf'd W)


Fisher, Sir Nigel
Mabon, Rt Hon Dr J. Dickson


Fletcher, A. (Ed'nb'gh N)
Macfarlane, Neil


Fletcher-Cooke, Sir Charles
MacGregor, John


Fookes, Miss Janet
MacKay, John (Argyll)


Forman, Nigel
Macmillan, Rt Hon M.


Fowler, Rt Hon Norman
McNair-Wilson, M. (N'bury)


Fox, Marcus
McNair-Wilson, P. (New F'st)


Fraser, Peter (South Angus)
McNally, Thomas


Fry, Peter
Madel, David


Gardner, Edward (S Fylde)
Major, John


Garel-Jones, Tristan
Marland, Paul


Ginsburg, David
Marten, Rt Hon Neil





Maude, Rt Hon Sir Angus
Shaw, Giles (Pudsey)


Mawby, Ray
Shelton, William (Streatham)


Mawhinney, Dr Brian
Shepherd, Colin (Hereford)


Maxwell-Hyslop, Robin
Shepherd, Richard


Mayhew, Patrick
Shersby, Michael


Mellor, David
Silvester, Fred


Meyer, Sir Anthony
Sims, Roger


Miller, Hal (B'grove)
Skeet, T. H. H.


Mills, Iain (Meriden)
Smith, Cyril (Rochdale)


Mills, Sir Peter (West Devon)
Smith, Dudley


Miscampbell, Norman
Smith, Tim (Beaconsfield)


Mitchell, David (Basingstoke)
Speed, Keith


Moate, Roger
Speller, Tony


Monro, Sir Hector
Spence, John


Montgomery, Fergus
Spicer, Jim (West Dorset)


Moore, John
Spicer, Michael (S Worcs)


Morris, M. (N'hampton S)
Sproat, Iain


Morrison, Hon C. (Devizes)
Squire, Robin


Morrison, Hon P. (Chester)
Stainton, Keith


Mudd, David
Stanbrook, Ivor


Murphy, Christopher
Stanley, John


Myles, David
Steel, Rt Hon David


Neale, Gerrard
Steen, Anthony


Needham, Richard
Stevens, Martin


Nelson, Anthony
Stewart, A.(E Renfrewshire)


Neubert, Michael
Stewart, Ian (Hitchin)


Newton, Tony
Stokes, John


Normanton, Tom
Stradling Thomas, J.


Ogden, Eric
Tapsell, Peter


O'Halloran, Michael
Taylor, Teddy (S'end E)


Onslow, Cranley
Tebbit, Rt Hon Norman


Oppenheim, Rt Hon Mrs S.
Temple-Morris, Peter


Osborn, John
Thomas, Rt Hon Peter


Page, John (Harrow, West)
Thompson, Donald


Page, Richard (SW Herts)
Thorne, Neil (Ilford South)


Parkinson, Rt Hon Cecil
Thornton, Malcolm


Parris, Matthew
Townend, John (Bridlington)


Patten, John (Oxford)
Townsend, Cyril D, (B'heath)


Pattie, Geoffrey
Trippier, David


Pawsey, James
Trotter, Neville


Penhaligon, David
van Straubenzee, Sir W.


Percival, Sir Ian
Vaughan, Dr Gerard


Pink, R. Bonner
Viggers, Peter


Pollock, Alexander
Waddington, David


Porter, Barry
Wainwright, R. (Colne V)


Prentice, Rt Hon Reg
Wakeham, John


Price, Sir David (Eastleigh)
Waldegrave, Hon William


Prior, Rt Hon James
Walker, Rt Hon P. (Wcester)


Proctor, K. Harvey
Walker, B. (Perth)


Raison, Rt Hon Timothy
Waller, Gary


Rathbone, Tim
Walters, Dennis


Rees, Peter (Dover and Deal)
Ward, John


Rees-Davies, W. R.
Warren, Kenneth


Renton, Tim
Watson, John


Rhodes James, Robert
Wellbeloved, James


Rhys Williams, Sir Brandon
Wells, Bowen


Ridley, Hon Nicholas
Wells, John (Maidstone)


Ridsdale, Sir Julian
Wheeler, John


Rifkind, Malcolm
Whitelaw, Rt Hon William


Rippon, Rt Hon Geoffrey
Whitney, Raymond


Roberts, M. (Cardiff NW)
Wickenden, Keith


Roberts, Wyn (Conway)
Wilkinson, John


Rodgers, Rt Hon William
Williams, D. (Montgomery)


Roper, John
Williams, Rt Hon Mrs (Crosby)


Ross, Stephen (Isle of Wight)
Winterton, Nicholas


Rossi, Hugh
Wolfson, Mark


Rost, Peter
Young, Sir George (Acton)


Royle, Sir Anthony
Younger, Rt Hon George


Rumbold, Mrs A. C. R.



Sainsbury, Hon Timothy
Tellers for the Noes:


St. John-Stevas, Rt Hon N.
Mr. Anthony Berry and


Scott, Nicholas
Mr. Carol Mather.

Question accordingly negatived.

Clause 47

INVESTMENT IN NEW CORPORATE TRADES

The Minister of State, Treasury (Mr. John Wakeham): I beg to move amendment No. 69, in page 43, line 19, at end insert—
'(2A) In subsection (7) of section 55 of the Finance Act 1981 (restrictions as to share capital for qualifying company for purposes of section 52 of that Act) for the words "at any time in the relevant period include" there shall be substituted the words "include at any time in the period of three years beginning with the date of issue of the shares in respect of which relief is claimed".'.
The amendment relates to the business start-up scheme. The purpose is to change slightly the rules relating to share capital incorporated in the scheme. Certain companies are interested in using the scheme, but their share capital does not comply with the rules. If they are able and willing to adjust their share capital for the future, they will be eligible to take part, notwithstanding the fact that in the past their share capital had made them ineligible.

Amendment agreed to.

Clause 48

PURCHASE OF OWN SHARES BY UNQUOTED TRADING COMPANY

Mr. Ridley: I beg to move amendment No. 70, in page 44, line 9, after 'payment', insert
'(apart from any sum applied in paying capital gains tax charged on the redemption, repayment or purchase)'.
The amendment fulfils an undertaking that I gave in Committee to my hon. Friend the Member for Bath (Mr. Patten), whom we all hope will soon recover and be back with us.
The new tax treatment available where shares have to be sold back to the company to meet a liability for capital transfer tax on death will be amended to ensure that the benefit will not be lost merely because some of the proceeds are used to pay for any capital gains tax liability charged on the sale of the company. It is a relieving provision and I hope that it will be helpful.

Mr. Robert Sheldon: I am almost tempted to ask the Financial Secretary a number of questions, because I am not certain that he understands all the amendments that he has to move. We viewed his reply on the previous debate with some concern. As I am satisfied with the amendment before us, I am prepared to let it go, but we will be looking for evidence of good behaviour by the hon. Gentleman.

Amendment agreed to.

Schedule 9

PURCHASE OF OWN SHARES BY UNQUOTED TRADING COMPANY

Sir William Clark: I beg to move amendment No. 71, in page 168, line 29, leave out paragraph 1.
This is a simple amendment. The schedule relates to the purchase of shares by unquoted companies. The amendment would remove the requirement that the vendor of shares in the company must be ordinarily resident in the United Kingdom.
Clause 48 and the schedule contain extensive anti-avoidance provisions and I cannot, therefore, see why the

sale of shares should be restricted to those who are ordinarily resident in this country. It could be in a company's interests to buy out a non-resident shareholder. For example, he may intend to set up an overseas rival to the organisation in this country.
I cannot understand why the Treasury should insist that vendors of shares in unquoted companies must be ordinarily resident in the United Kingdom. The tax concessions in this part of the Bill could be an inducement to an overseas shareholder to sell his shares back to the company.

Mr. Ridley: While I cannot accept my hon. Friend's amendment, the next two amendments are concessions in the area of purchase of own shares. I tried hard to accept his amendment and had long discussions to see if it was possible, culminating in a letter to my hon. Friend in which I explained the two reasons why the Government do not feel able to meet his amendment.
The first reason is not one that I would stress or dwell on because it is only a partial reason. If an overseas resident sells his shares back to a United Kingdom company he would, according to the clause, escape the tax on a distribution and could claim that it would be a capital gain only if, indeed, there was a capital gain. As he would be an overseas resident he would be exempt from capital gains tax and there would be no tax to pay. That could be wrong as the gain is the result of enterprise and work in a British company. That is not uniform because it will vary according to whether we have a double tax agreement with the country, and the circumstances of the overseas resident.
The second and real reason why we cannot accept the amendment is that it makes it almost impossible to police the clause because the Revenue is not in a position, and never can or will be, to find out who is the beneficial owner of a share that is sold by an overseas resident. It would be possible for those who wanted to manipulate the new scheme of purchase of own shares to set up overseas nominees or front men who could carry out the transaction and refuse to divulge to the Revenue who was the beneficial owner or what were the circumstances to ensure that the transaction takes place within the rules. We have extended the privileged tax treatment for purchasing own shares both to corporate and to trustee shareholders, and it would be difficult to ensure that it was not being manipulated.
I looked again for a satisfactory way in which to distinguish genuine sales by non-residents which would not prejudice the two purposes for which we need the rule, but I failed to find it. It is one of those unfortunate examples where the bona fide operator does not realise that certain restrictions are necessary upon him because there are some who are not so bona fide and will take advantage of what is being done. It is difficult to justify to the bona fide operator, but, on the other hand, we would not be able to extend the privilege at all unless we were able to police it.
Sadly, and after much deep examination, I must tell my hon. Friend that we have not found a way around the difficulties, although we will continue to see whether they can be overcome in the light of experience with the scheme.

Sir William Clark: We said in Committee on many occasions that the Revenue seem to be paranoid about


loopholes and about the person who tries to escape taxation. My hon. Friend rightly suggests that a nonresident might try to manipulate the tax system to avoid capital gains tax, but he can do that now if he is so minded. It is illegal, and he takes the chance of being caught. I do not accept my hon. Friend's argument about manipulation, because the anti-avoidance provisions are extremely stringent. However, I do not want to labour the point, because my hon. Friend has said that he will have another look at it and also because the Government have made a number of concessions. One can see from the Government amendments to follow that Ministers have met many of the points raised in Committee. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Ridley: I beg to move amendment No. 72, in page 169, line 2, at end insert—
'(1A) If at any time during that period the shares were transferred to the vendor by a person who was then his spouse living with him then, unless that person is alive at the date of the purchase but is no longer the vendor's spouse living with him, any period during which the shares were owned by that person shall be treated for the purposes of sub-paragraph (1) above as a period of ownership by the vendor.'.
One of the conditions of clause 48 is that the shares in question must have been owned by the vendor for at least five years. Schedule 9(2) provides for this. The purpose of this small amendment is to allow the ownership by a husband or a wife to count for this purpose as ownership by whichever spouse is selling the shares. I commend the amendment as a slight improvement.

Amendment agreed to.

Mr. Ridley: I beg to move amendment No. 73, in page 169, line 4, after 'owner', insert '(a)'.

Mr. Deputy Speaker (Mr. Paul Dean): With this it will be convenient to take Government amendments Nos. 74, 75 and 76.

Mr. Ridley: The purpose of the amendment is to reduce from five years to three years the period of ownership required where the sale to the company follows a death. This is a point that several of my hon. Friends have raised with me. It seems reasonable that, where an owner intended to hold shares for five years but unfortunately died, his heirs or widow should not be circumscribed by the five-year rule, particularly as they might need to raise cash for one purpose or another. I hope that the House will feel that this small amendment slightly improves the scheme.

Amendment agreed to.

Amendments made:No. 74, in page 169, line 7, at end insert
'and
(b) that sub-paragraph shall have effect as if it referred to three years instead of five'.

No. 75, in page 169, line 9, after 'owner', insert '(a)'.

No. 76, in page 169, line 11, at end insert
'and
(b) that sub-paragraph shall have effect as if it referred to three years instead of five'.

No. 77, in page 172, line 30, at end insert—
'(3) This paragraph has effect subject to paragraph 9 below.'.—[Mr. Ridley.]

Mr. Ridley: I beg to move amendment No. 78, in page 173, line 13, at end insert—
'(1A) A payment made by a company on the redemption, repayment or purchase of its own shares shall be deemed to be one to which section 48 of this Act does not apply if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will not apply.'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 79.

Mr. Ridley: This is a more substantial amendment. Clause 48 treats the transaction where a company buys back or redeems its shares as one of purchase and sale and not as one involving a distribution of profits. Generally, this will give more favourable tax treatment to all concerned. This is, however, not always the case. It has come to our notice that there could be circumstances in which those concerned may want to be sure that the new tax treatment will not apply because it gives a less favourable tax result for them.
We have already set out in Committee a clearance procedure in schedule 9(10) under which the company may seek advance confirmation that the Revenue is satisfied that clause 48 will apply. If it notifies the company that it is so satisfied, that clause is statutorily deemed to apply. The amendment now gives the same opportunity to seek certainty about the application of the law, where the desired result is the opposite—that clause 48 should not apply.

Mr. Robert Sheldon: I am not sure of the circumstances in which it will be favourable to the taxpayer for the new tax treatment not to apply. I understand about purchase and repayment, but if the Minister has an example, I should be grateful to him if he would give it, because I could not think of one.

Mr. Ridley: It came to our notice after the debates in Committee that the Industrial and Commercial Finance Corporation and possibly other companies are in the business of subscribing to shares, particularly in unquoted companies, and in doing so they negotiate terms that take account of the tax consequences for them. If they agree terms on the basis of a sale to the company invested in, clause 48 will not apply, and if it were subsequently to turn out that it applies, they might be able to get a better price because the redeeming company would be relieved of having to pay advance corporation tax. For some companies, investment in other companies is treated as a trade, so the returns from the sale of shares are treated as franked investment income. Therefore, that is more valuable to those companies than to treat the returns as a capital gain. I hope that that helps the right hon. Gentleman.

Amendment agreed to.

Amendment made: No. 79, in page 173, line 29, leave out from 'notification' to 'shall' in line 30 and insert 'by the Board'.—[Mr. Ridley.]

Mr. Ridley: I beg to move Amendment No. 80, in page 175, line 18, leave out from 'sub-paragraph' to end of line 19 and insert—
'or of companies in a group to which that company belongs, or their dependants (and are not wholly or mainly for the benefit of directors or their relatives);
and for the purposes of this sub-paragraph "group" means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries.'.


This amendment corrects, in favour of the taxpayer, two defects in the provisions relating to employee trusts. Paragraph 14(9) (b) of schedule 9 excludes certain trusts from the rules that make trustees and beneficiaries associates. As drafted, it does so broadly only where the trust is exclusively for the benefit of employees of the company concerned. The amendment extends the definition in two ways. First, trusts will now also be excluded where they are for the benefit of employees or their dependants. Those last three words are vital. Secondly, they will be excluded where they are set up to benefit employees of part or all of the group of which the company is a member. In other words, there is a loosening of the definition of "associate" in favour of trusts and employees.

Amendment agreed to.

Mr. Ridley: I beg to move amendment No. 81, in page 175, line 35, leave out from beginning to end of line 45 and insert—
'(3) Where a person—

(a) acquired or became entitled to acquire loan capital of a company in the ordinary course of a business carried on by him, being a business which includes the lending of money, and
(b) takes no part in the management or conduct of the company,

his interest in that loan capital shall be disregarded for the purposes of sub-paragraph (2) above.'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 82.

Mr. Ridley: Clause 48 provides new tax treatment when a company buys back or redeems its share capital and certain conditions are met. One of the conditions is that after the transaction the vendor must not be connected with—that is, must not have a dominant interest in—the company. Schedule 9, paragraph 7, so provides and paragraph 15 spells out the circumstances in which the person is treated as being connected with the company. One of the matters taken into account is possession of or entitlement to loan capital. That is necessary because a person who is a significant loan creditor can in practice exercise a dominant influence over a company.
It has been suggested to us, however, that that rule could inhibit institutions from providing finance in a mix of shares and loan capital. They sometimes subscribe for preference shares redeemable before the loan is repayable, and the loan which is essential to the financing of the company may constitute more than 30 per cent. of the combined loan and share capital. In these circumstances, as the schedule is at present drafted, clause 48 would not apply when the shares were redeemed because the vendor would continue by virtue of its lending to be connected with the company. I am assured that this combination of circumstances does arise. Therefore, we think that it is right to make an exception to cover those cases. The amendments do just that.

Amendment agreed to.

Amendment made: No. 82, in page 176, line 17 at end insert—
'(5A) References in this paragraph to the loan capital of a company are references to any debt incurred by the company—

(a) for any money borrowed or capital assets acquired by the company, or
(b) for any right to receive income created in favour of the company, or

(c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).'.—[Mr. Ridley.]

Clause 49

PURCHASE OF COMPANY'S OWN SHARES FROM DEALER

Mr. Ridley: I beg to move amendment No. 83, in page 45, line 3, leave out from beginning to 'shares' and insert
'but subject to subsection (4) below.
(4) Subsection (1) above shall not apply in relation to—

(a) the redemption of fixed-rate preference shares, or
(b) the redemption, on terms settled or substantially settled before 6th April 1982, of other preference shares issued before that date,

if (in either case) the shares were issued to and continuously held by the person from whom they are redeemed.
(5) In this section—
fixed-rate preference shares" means shares which—

(a) were issued wholly for new consideration, and
(b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and
(c) do not carry any right to dividends other than dividends which—


(i) are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and
(ii) together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued;

"new consideration" has the same meaning as in Part X of the Taxes Act; and'.
This also is an amendment to the purchase of own shares provisions. When a company buys back or redeems its own shares, the normal position is that any payment over and above the return in the original subscription price is a distribution of profits. Clause 49 ensures that when a shareholder is a dealer in shares he is not to be treated as receiving a distribution. Instead, the transaction is treated in his hands just like any other disposal of shares that he makes—as a sale. The purchase or redemption price is accordngly taken into account in arriving at his dealing profits.
There is a special case which needs further consideration. It is that of institutions or others who do not buy and sell shares but provide finance by subscribing for shares and are treated as carrying on a trade or providing finance. They also are covered by the clause. The price that they receive on the sale of the shares by them, otherwise than to the company, would be taken into account in computing their profits chargeable to tax under case 1 or case 2 of schedule D. That gives rise to two problems that it is right to resolve.
First, some institutions have in the past subscribed for preference shares of various types. There is usually little premium due on their redemption and the change of treatment will have little effect. It has been suggested, however, that in some cases the finance package has been negotiated on the basis of a considerable part of the consideration of the shares and was to be paid not in the form of dividends, which were accordingly lower than usual, but in the premium on redemption. When that financing was negotiated, it was expected that the premium would be treated as a distribution which in the hands of a corporate institution is franked investment income and therefore not subject to further tax. The change introduced by clause 49 will increase the tax


consequence. They could thus obtain a significantly smaller return than expected from the investment. That matter should be put right.
The provision of finance on that basis should be encouraged to continue. It is advantageous to the company that is raising finance to be relieved of some of the burden of paying for finance in the early years when it needs to retain as much of its profit as possible. It is helpful to be able to issue shares on terms under which the company must pay a lower than usual rate of dividend and makes it up only when the shares are redeemed. Clause 49 will discourage that. Those who provide that type of finance must take more of a return in the form of dividend if they are to continue to be able to offer finance and receive the same tax reward as before doing so.
In providing for the future, however, we must be careful. Clause 49 is partly an anti-avoidance provision in so far as we make a breach in it for shares that are already issued. There is no scope to take advantage of that breach. That is not so for shares that will be issued in future.
In future, therefore, I propose to restrict the change in the rules for fixed-rate preference shares as defined in the clause. That is based on an existing tax definition which broadly excludes shares which, though called preference shares, are nearer to ordinary shares. That will go a long way towards meeting the points that have been put to us.

Mr. Robert Sheldon: I understand the way in which the clause affects the return on investment when one is concerned about the redemption of fixed-rate preference shares, but does the hon. Gentleman believe that that is a problem for the future? I should have thought that there were few, if any, cases when that applied to transactions that have taken place before the conception of the present legislation. Perhaps the hon. Gentleman could enlighten me. I know that he has great hopes for the extension of this form of lending instrument for the future. If that is so, this type of legislation is desirable and necessary. Without his expectation for the future, however, would it have been necessary?

Mr. Ridley: I must agree with the right hon. Gentleman that when the legislation was designed we did not expect there to be any cases of this kind. Only when it was published did the possibility come to light that some loans of this kind existed. It is a reasonable and respectable form of finance. First, therefore, we did not wish to prejudice loans that existed. Secondly, we wanted to facilitate the continuance of this form of financing.
We are verging on the subject of yesterday's debate on different forms of lending instruments. The vast variety of these and the differing tax treatments mean that one must pick one's way through this field carefully. Our guiding principle has been to give people the maximum freedom to do that which suits them most. The amendments were drafted with that in mind.

Amendment agreed to.

Schedule 10

INCOME TAX: MAINTENANCE FUNDS

Amendments made: No. 84, in page 178, line 1, leave out from first 'of' to 'no' in line 2 and insert
'paragraph 3(1) of Schedule (Capital transfer tax: maintenance funds) to the Finance Act 1982 there is (or, but for paragraph 3(4), there would be)'.

No. 85, in page 178, line 6, leave out 'the Finance Act 1982' and insert 'that Act'.

No. 86, in page 178, line 22, leave out from first 'of' to 'no' in line 23 and insert
'paragraph 3(1) of Schedule (Capital transfer tax: maintenance funds) to the Finance Act 1982 there is (or, but for paragraph 3(4), there would be)'.—[Mr. Ridley.]

Clause 60

DOUBLE TAXATION RELIEF: INTEREST ON CERTAIN OVERSEAS LOANS

Mr. Ridley: I beg to move amendment No. 87, in page 51, line 30, leave out from 'exceeds' to end of line 32 and insert
'the amount of the credit which, by virtue of Chapter II of Part XVIII of the Taxes Act and subsection (5) below, is allowed for that foreign tax against income tax or corporation tax'.
The amendment relates to the clause dealing with double taxation relief on overseas loans of banks which we discussed in Committee. It affects the double taxation relief available when a United Kingdom bank or a United Kingdom branch of a foreign bank is engaged in overseas lending and foreign tax is withheld from the interest paid by the overseas borrowers. The amendment ensures that in any case in which the whole of the foreign tax does not qualify for credit relief the non-creditable portion can be deducted in computing the bank's profits for United Kingdom tax purposes.

Amendment agreed to.

Clause 65

ALLOWANCES FOR ASSETS LEASED OUTSIDE THE UNITED KINGDOM

Mr. Ridley: I beg to move amendment No. 167, in page 55, line 45, after 'effect', insert
'subject to subsection (3A) below'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 168, 169, 170, 171, 93, and 174.

Mr. Ridley: The purpose of this group of amendments is to prevent certain schemes designed to achieve a tax subsidy from the United Kingdom Exchequer for assets leased overseas. Despite the new reduced rate of 10 per cent. annual writing down allowances for overseas leasing, where a lease falls foul of any of the five new conditions in the amendment no allowances are due and, if already given, are withdrawn.
I gave notice in Committee that this loophole had become apparent to us even before the ink was dry on the clauses restricting overseas lending. The amendments are designed to put that undertaking into effect. I commend them to the House.

Mr. Robert Sheldon: From what date would the allowances be withdrawn?

Mr. Ridley: The provisions apply to expenditure incurred on or after 23 June 1982, which was the date on which I announced in Committee that we intended to legislate in this way.

Mr. Sheldon: With the leave of the House, may I ask whether the Financial Secretary can give us any idea of the extent of transactions carried out in any of those five categories between the publication of the Bill and 23 June?

Mr. Ridley: I cannot give a categoric assurance that no such transactions were carried out, but I think that in this case the stable door was bolted before any horses got out. It was partly because we had seen the possibilities and partly because we heard that others had also seen them that we moved as quickly as we did and sought the leave of the House to legislate from the date on which the announcement was made. I suspect, however, that little, if any, business was written before that date.

Amendment agreed to.

Amendments made: No. 168, in page 56, line 15, at end insert—
'(3A) No first year allowances, balancing allowances or writing-down allowances shall be available in respect of expenditure falling within subsection (1) above if the circumstances are as mentioned in subsection (3)(b) above and—

(a) there is a period of more than one year between the dates on which any two consecutive payments become due under the lease; or
(b) any payments other than periodical payments are due under the lease or under any agreement which might reasonably be construed as being collateral to the lease; or
(c) disregarding variations made under the terms of the lease which are attributable to—

(i) changes in the rate of corporation tax or income tax, or
(ii) changes in the rate of capital allowances, or
(iii) changes in any rate of interest where the changes are linked to changes in the rate of interest applicable to inter-bank loans, or
(iv) changes in the premiums charged for insurance of any description by a person who is not connected with the lessor or the lessee,

any of the payments due under the lease or under any such agreement as is referred to in sub-paragraph (b) above, expressed as monthly amounts over the period for which that payment is due, is not the same as any other such payment expressed in the same way; or
(d) either the lease is expressed to be for a period which exceeds thirteen years or there is, in the lease or a separate agreement, provision for extending or renewing the lease or for the grant of a new lease so that, by virtue of that provision, the machinery or plant could be lease for a period which exceeds thirteen years; or
(e) at any time the lessor or a person connected with him will, or may in certain circumstances, become entitled to receive from the lessee or any other person a payment, other than a payment of insurance moneys, which is of an amount determined before the expiry of the lease and which is referable to a value of the machinery or plant at or after that expiry (whether or not the payment relates to a disposal of the machinery or plant).

(3B) Where a first year allowance, a balancing allowance or a writing-down allowance has been made in respect of expenditure incurred in providing machinery or plant and, at any time in the requisite period, an event occurs such that, by virtue of subsection (3A) above, there is no right to that allowance, an amount equal to any such allowance which has previously been given (less any excess reliefs previously recovered by the operation of section 66 of the Finance Act 1980) shall, in relation to the person to whom the machinery or plant belongs immediately before the occurrence of that event, be treated as if it were a balancing charge to be made on him for the chargeable period in which, or in the basis period for which, the machinery or plant is used at the time that event occurs.

(3C) Subsections (3) and (4) of section 66 of the Finance Act 1980 apply in relation to the allowances mentioned in subsection (3B) above as they apply in relation to the allowances mentioned in subsection (2) of that section.'.

No. 169, in page 56, line 29, leave out 'subsection (1)' and insert 'subsections (1) and (3B)'.

No. 170, in page 56, line 40, at beginning insert
'Subject to subsection (7A) below'.—[Mr. Ridley.]

Mr. Ridley: I beg to move amendment No. 89, in page 57, line 6, leave out '1984' and insert '1985'.

Mr. Deputy Speaker: With this, it will be convenient to discuss also Government amendments Nos. 90, 91 and 92.

Mr. Ridley: The amendment is designed to help those who would otherwise have been caught by the overseas leasing arrangements. We allowed those who have contractual obligations—at least with their suppliers if not with their lessors—to have two years' grace before the new rules applied to them, where they were under a contractual obligation. We understand that certain contracts, particularly building and civil engineering contracts overseas, might run for a longer period, so we suggest extending it a further year to make sure that those contracts that were genuinely commitments would not be disadvantaged by the changeover.
The purpose of the three related amendments, amendments Nos. 90, 91 and 92, is to allow some cross-border leasing transactions, particular sale and leaseback, that were arranged before Budget day and completed before 18 July 1982, to qualify for 25 per cent. writing-down allowances, instead of the new lower rate of 10 per cent. allowances. The difference is between sale and leaseback rather than leaseback transactions and the purpose is to ensure that no one is disadvantaged by the transaction that we introduced in the Budget.

Mr. Robert Sheldon: What is the cost of amendment No. 89?

Mr. Ridley: I do not have a figure available but I do know of two contracts—it would not be proper to reveal their nature—that were genuine undertakings and that would have caused a large loss for those who undertook the contracts and would have to renege upon them. The cost difference between the two treatments of leasing would be very small and depends upon whether the lessor, the bank, would have found some other way of sheltering its profits had this amendment not been put down or whether it would have found something else to lease instead. One can safely say that the cost is minimal.

Amendment agreed to.

Amendments made: No. 171, in page 57, line 6, at end insert—
'(7A) In its application to subsections (3A) to (3C) above, subsection (7) above has effect as if for the references to 10th March 1982 there were substituted references to 23rd June 1982.'.

No. 90, in page 57, line 24, after 'arrangements' insert '(i)'.

No. 91, in page 57, line 28, after 'supplier' insert
'or (ii) the lessee purchases the machinery or plant in question and transfers it to the lessor before 8th July 1982'.

No. 92, in page 57, line 32 at beginning insert 'disregarding any use before 8th July 1982'.

No. 93, in page 57, line 38 leave out 'paragraph (g) above' and insert 'this section'.

Schedule 11

ALLOWANCES FOR ASSETS LEASED OUTSIDE THE UNITED KINGDOM

No. 174, in page 179, line 22 at end insert—
'3A.—(1) Subject to sub-paragraph (3) below, the provisions of sub-paragraph (2) below apply where—

(a) by virtue of subsection (3B) of the principal section any amount falls to be treated as if it were a balancing charge, and
(b) the person on whom the balancing charge is, by virtue of that subsection, to be made acquired the machinery or plant in question as a result of a transaction which was, or a series of transactions each of which was, between connected persons, and
(c) a first-year allowance, a balancing allowance, or a writing-down allowance in respect of expenditure on the provision of that machinery or plant has been made to any of those persons.

(2) Where this sub-paragraph applies—

(a) subsection (3B) of the principal section shall have effect as if it referred to the allowances specified in sub-paragraph (1)(c) above; and
(b) for the purposes of that subsection any consideration paid or received on a disposal of the machinery or plant between connected persons shall be disregarded; and
(c) if a balancing allowance or balancing charge is made in respect of the machinery or plant, there shall be made such adjustments of the relief falling to be taken into account by virtue of paragraph (a) above as are just and reasonable in the circumstances.

(3) Sub-paragraph (2) above does not apply where section 154(2), section 155(1), or section 225(2) of the Taxes Act or subparagraph (a) or sub-paragraph (b) of paragraph 13 of Schedule 8 to the Finance Act 1971 (succession to trades) applied on the occasion of the transaction or transactions referred to in subparagraph (1)(b).
(4) Section 533 of the Taxes Act (connected persons) applies for the purposes of this paragraph.'.

Clause 76

EXTENSION OF GENERAL RELIEF FOR GIFTS

Mr. Hayhoe: I beg to move amendment No. 94, in page 66, line 6, leave out 'by an individual'.
This amendment meets a point that was raised by my hon. Friend the Member for Croydon, South (Sir W. Clark) in Committee that I undertook to examine. It will allow claims for gifts rollover relief to be made by the transferor alone when property is distributed from one settlement to another. As the Bill was previously drafted, the claim had to be by the transferor and the transferee together or by the transferee.

Amendment agreed to.

Clause 79

MAINTENANCE FUNDS FOR HISTORIC BUILDINGS

Amendments made: No. 96, in page 71, line 8, leave out
'section 108(1) or (5) or 109(3) of'
and insert
'paragraph 1(1) or (5) or 3(1) of Schedule (Capital transfer tax: maintenance funds) to'.

No. 97, in page 71, line 11, leave out
'section 108(9) of that Act'
and insert
'paragraph 1(2) or (8) or 3(4) of that Schedule'.—[Mr. Ridley.]

Schedule 12

THE INDEXATION ALLOWANCE

Mr. Ridley: I beg to move amendment No. 98, in page 181, line 44, at end insert
'any of the following enactments applying to the initial disposal, namely'.
With this it is convenient to take amendment No. 99, which is consequential. The amendments correct an error in the Bill. They remove a small uncertainty in the drafting and put the estimate of a disposal by a personal representative of a legatee on the basis that the Government originally intended.

Amendment agreed to.

Amendment made: No. 99, in page 182, line 1, leave out 'or section 49(4)'.—[Mr. Ridley.]

Mr. Ridley: On a point of order, Mr. Deputy Speaker. It might be more convenient if we take amendment No. 175 with the next group of amendments.

Mr. Deputy Speaker: If the House agrees, we can take amendment No. 175 with the next group. To avoid any confusion, I shall ask the Financial Secretary to move amendment No. 175.

Mr. Ridley: I beg to move amendment No. 175, in page 185, line 3, leave out 'paragraph' and insert 'Part of this Schedule'.

Mr. Deputy Speaker: With this it will be convenient to take the following amendments: No. 163, in page 185, line 5, leave out
'Subject to paragraphs 9 and 11 below'.
Government amendment No. 176.
No. 164, in page 185, line 28, leave out paragraph 9.
Government amendment No. 177.
No. 165, in page 186, line 15, leave out paragraph 10.
Government amendments Nos. 178 and 179.

Mr. Ridley: I am grateful to you, Mr. Deputy Speaker, for allowing us to discuss the next group together because the amendments all deal with the transitional arrangements for capital gains tax indexation between the 12 months immediately before 5 April this year and the period after that. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) put down some useful suggestions in those amendments. I hope that my hon. Friend will excuse me if I outline the matters. I do not wish to trespass on his amendments and I look forward to hearing what he says.
The first question is, what should be the treatment of share pools between 9 March 1982 and the end of the financial year, 5 April 1982? The second question is, what should be the treatment of share pools in the 12 months before the beginning of the financial year 1981–82? My hon. Friend and the Government are at one on what should be done about the three weeks between the Budget and the end of the financial year. We both suggest the abolition of special rules. The cost of this abolition is negligible. It is unmeasurable. There was no forestalling, and there were no bed and breakfast transactions designed to take advantage of the situation. I must concede to my hon. Friend that the legislation was not published. Even if it had been published, it would have been so complicated that nobody could have taken advantage of the short period in a way that the rules sought to guard against. We are at one that those rules should be abolished.
10 pm
As regards the transitional period, while shares in a pool prior to the Budget are waiting to acquire their 12 months' maturity, so to speak, so that they can become subject to the indexation allowance, my hon. Friend again suggests abolition. I should have liked to go along with him on that. It would have saved a great deal of transitional complication and it would have been easier for the taxpayer and the Revenue. However, there is a snag and it is for that reason only that we have not been able to accommodate him. This concession would cost £7 million in 1983–84 and £40 million in the first full year. In subsequent full years the amount would decline, but the cost might amount to £100 million overall.
If we were to make that concession for assets bought within less than a year of Budget day, so that they are entitled to the first year's indexation, we would have to extend that concession to non-quoted shares and other assets such as land, buildings and works of art. That would double the cost of the concession. Therefore, after a severe analysis, I must advise the House that to accept the amendment could cost, over a number of years, as much as £200 million.
Instead, we suggest modified rules under which the cost will be much lower—£5 million or less—in the first full year. These rules are much less complicated and restrictive. Although they are not all that my hon. Friend might wish, they go some way to simplifying the tax as well as making it slightly easier to administer. If my hon. Friend wishes, I can detail the new arrangements, but they are complicated and the House might have already studied them and be aware of what is proposed in the Government amendments.
My hon. Friend has been a persistent and well-informed critic of the detailed provisions of the capital gains indexation, while at the same time supporting the Goverment's intentions. I have nothing but admiration and gratitude for the way that he has made us look at all these points and seek to simplify and improve the tax. I pay tribute to his understanding, percipience and persistence. His main criticism is that it is not possible to continue with share pooling and that we should move to the share identification rules instead.
Although I cannot meet that point, the Government recognise that the ending of share pooling may cause problems for institutional investors such as the life offices, particularly in the use of their computers. We have, therefore, asked the Revenue to undertake discussions with the institutions on how the new rules can best be implemented in practice. I hope that those discussions will help them with their technical problems and we shall do our utmost to meet any reasonable requests that result from them.

Mr. Anthony Beaumont-Dark: It is very difficult, after such a gracious tribute from my hon. Friend the Financial Secretary, to have anything critical to say. For some weeks we have had not a running battle but certainly a running and interesting discussion. Correspondence has taken place between myself and the Minister and between financial institutions and the Minister.
Particularly after an exchange such as we had in the early hours of this morning, I should not like the Treasury team—under the leadership of the Financial Secretary it has been a team—to think that the investing community,

of which I am one, as the House well knows, have been ungrateful to the Government for their willingness to concede the point that indexation of capital gains is proper, because to tax capital gains is a right thing but capital confiscation is a bad thing.
The Government have gone a very long way upon the path towards seeing that justice is done to those who invest their capital and wish to see it grow and not to be taken away from them.
I recognise—as does anyone who understands the problem—that when we try to draw up legislation to stop people avoiding tax but at the same time to let them take the full benefits of private gain, the complications are tremendous. It is shown by the fact that the very schedule that we are discussing tonight—which should be basically a simple one, because it is dealing only with one-year arrangements and in many ways is dealing only with a matter of months—takes up about eight pages of the Bill, so the complications involved are obviously many.
I am particularly heartened by the way that the Financial Secretary has been willing to understand that the comments from institutions, and particularly from the life offices and the Stock Exchange, have not been carping comments; the intention has simply been to try to make an excellent idea work better. I am glad to acknowledge that we have, at this late stage in the Bill, arrived at a stage where each side understands the other that much better. I do not altogether accept the Financial Secretary's suggestion that the total cost over some years could be £200 million if adopted my suggestions. Figures prepared for me show that the total cost over a period might be more like £30 million.
After an interesting and fruitful debate over some weeks and months, we have reached the stage where the Treasury is willing to accept that the investing public are grateful for the intentions and are willing to discuss the matter further so that a good idea can be made to work better. Therefore, it would be churlish of me not to accept the good faith of the Government and of the Financial Secretary, which I have never had any reason to doubt. In those circumstances, I shall not wish to pursue my amendment.

Amendment agreed to.

Amendments made: No. 176, in page 185, line 5, leave out 'paragraphs 9 and 11' and insert 'paragraphs 9'.
No. 177, in page 185, line 41, leave out from 'applies' to end of line 11 on page 186 and insert
'the identification rules set out in sub-paragraph (4) below shall be assumed to have applied in relation to every acquisition or disposal of securities which occurred after the day referred to in sub-paragraph (1)(b) above and before the operative date and which, apart from this paragraph, would have increased or reduced the size of the holding; and accordingly—

(a) only such of the securities (if any) which constituted the holding on that day as are not identified, by virtue of those rules, with securities disposed of before the operative dale shall be regarded as constituting the holding on the operative date; and
(b) all securities acquired after that day and before the operative date, so far as they are not so identified with securities disposed of before the operative date, shall be regarded as separate assets.

(4) The identification rules referred to in sub-paragraph (3) above are—

(a) that securities disposed of on an earlier date shall be identified before securities disposed of on a later date, and the identification of the securities first disposed of shall accordingly determine the securities which could be comprised in the later disposal; and


(b) that securities disposed of shall be identified with securities acquired on a later date rather than with securities acquired on an earlier date; and
(c) that securities disposed of shall be identified with securities acquired at different times on any one day in as nearly as may be equal proportions;

and these rules shall have priority according to the order in which they are set out above.
(4A) In this paragraph and paragraph 10 below—

(a)"the reduced holding" means the securities referred to in sub-paragraph (3)(a) above; and
(b) "relevant allowable expenditure" has, in relation to a disposal taking place at any time, the meaning assigned to it by subsection (2)(b) of section 80 of this Act in relation to a disposal to which that section applies.'.

No. 178, in page 186, line 16, leave out from 'of' to end of line 36 and insert—

'(a) the reduced holding, or
(b) any other securities which, by virtue of sub-paragraph (3) (b) of paragraph 9 above, constitute one or more separate assets,

the 1982 amount, as defined in that paragraph, shall be apportioned between the reduced holding and that asset or those assets in proportion to the number of securities comprised in each of them on the operative date.
(2) In relation to a disposal on or after the operative date, the amount apportioned to the reduced holding or to any asset by virtue of sub-paragraph (1) above shall be regarded for all purposes of capital gains tax as the relevant allowable expenditure attributable to the securities comprised in the reduced holding or, as the case may be, in the asset in question'.
No. 179, in page 186, line 42, leave out paragraph 11.—[Mr. Ridley.]

Clause 81

CALCULATION OF INDEXATION ALLOWANCE

Mr. Ridley: I beg to move amendment No. 100, in page 73, line 17, leave out from 'when' to end of line 18 and insert
'that expenditure became due and payable'.

Mr. Deputy Speaker: With this we shall take amendment No. 101, in page 73, line 17, leave out from 'was' to the end of line 18 and insert 'due and payable'.

Mr. Ridley: Government amendment No. 100 meets the points that my hon. Friend the Member for Croydon, South (Sir W. Clark) makes in amendment No. 101.
I undertook in Committee to table the amendment. It provides that when enhancement is made to an asset the value of that enhancement for the purposes of indexation will have the benefit of indexation relief from the time it became due and payable rather than when it was first reflected in the state or nature of the assets. I hope that it will be a welcome concession.

Amendment agreed to.

Clause 87

MAINTENANCE FUNDS: TREASURY DIRECTIONS

Amendment made: No. 103, in page 78, line 42, leave out from first 'of' to 'in' in line 44 and insert:
'paragraph 3(1) of Schedule (Capital transfer tax: maintenance funds) to this Act there was no charge (or, but for paragraph 3(4) of that Schedule, there would have been no charge) to tax' — [Mr. Wakeham.]

Clause 89

MAINTENANCE FUNDS: EXEMPT TRANSFERS

Amendment made: No. 162, in page 81, line 14, leave out 'becomes' and insert:
'by virtue of the transfer becomes, or immediately after the transfer remains,'.—[Mr. Wakeham.]

Clause 90

NON-RESIDENTS' BANK ACCOUNTS

The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne): I beg to move amendment No. 104, in page 81, line 36, after 'any', insert 'qualifying'.

Mr. Deputy Speaker: With this we shall take Government amendments Nos. 105 to 108.

Mr. Bruce-Gardyne: The House will be aware that clause 90 excludes foreign currency accounts held by an individual with no United Kingdom ties from the capital transfer tax charge on death. To qualify for exemption, the clause requires the account to be with a recognised bank within the meaning of the Banking Act 1979. The purpose of the amendments is to extend the range of qualifying accounts to accounts with the Bank of England, the Post Office—in other words the Giro bank—and licensed institutions—licensed deposit takers. I commend the amendments to the House.

Amendment agreed to.

Amendments made: No. 105, in page 81, line 36, leave out from 'his' to 'and' in line 37.

No. 106, in page 81, line 38, after 'any', insert 'qualifying'.

No. 107, in page 81, line 39, leave out from 'account' to first 'of'.

No. 108, in page 82, line 18, leave out subsection (5) and insert—
'(5) In this section "qualifying foreign currency account" means a foreign currency account with the Bank of England, the Post Office, a recognised bank or licensed institution; and for this purpose—

(a) "foreign currency account" means any account other than one denominated in sterling, and
(b) "recognised bank" and "licensed institution" have the same meanings as in the Banking Act 1979.'.—[Mr. Wakeham.]

Clause 96

RELEVANT PROPERTY

Amendments made: No. 109, in page 85, leave out line 9.

No. 110, in page 85, line 10, at end insert—
'(cc) property to which paragraph 2 of Schedule (Capital transfer tax: maintenance funds) to this Act applies;'.—[Mr. Wakeham.]

The Solicitor-General (Sir Ian Percival): I beg to move amendment No. 111, in page 85, line 29, at end insert—
'(2) The reference in subsection (1)(d) above to property which is part of or held for the purposes of a fund or scheme does not include a reference to a benefit which, having become payable under the fund or scheme, becomes comprised in a settlement.'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments No. 125 and No. 155.

The Solicitor-General: These are consequential amendments designed to ensure that the existing reliefs from capital transfer tax for superannuation schemes will apply unchanged under the new regime for discretionary trusts.

Amendment agreed to.

Clause 99

TEN-YEAR ANNIVERSARY

The Solicitor-General: I beg to move amendment No. 180, in page 86, line 21, leave out from 'year' to 'except' in line 23 and insert:
'an event occurs in respect of the settlement which could not have occurred'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 181 to 186.

The Solicitor-General: The Bill was amended in Committee to enable trustees of settlements set up before the introduction of capital transfer tax to elect for the existing capital transfer tax regime for discretionary trusts to continue to apply to their trusts for a limited period. It in effect postpones the implementation of the new regime that is introduced in the Bill. The seven amendments, which go together, extend the range of circumstances in which the election is available. They also effect the necessary consequential changes in relation to a trust tenure anniversary.

Mr. Robert Sheldon: Will the Solicitor-General tell us about the extension of the circumstances and what the circumstances apply to?

The Solicitor-General: The provisions of part II of the schedule were introduced by the Government in Committee in fulfilment of an undertaking given at the time when the Bill was published. It has since been represented that the requirement that there must be a payment out of the trust if the period of election is to be extended to 1 April 1984 is far too restrictive. It will not cover the case where, for example, the proceedings before the court result in the creation of an interest in possession or an employee or charitable trust rather than a payment out, since none of those events will involve an actual payment out of the trust, and the original wording was limited to payments out.
I can enlarge on that if the right hon. Gentleman wishes.

Amendment agreed to.

Amendment made: No. 181, in page 86, line 24, at end insert
'and
(c) the event is one on which tax is (or, apart from Part H of Schedule 14 to this Act, would be) chargeable under this Chapter.'.—[Mr. Wakeham.]

Clause 102

CHARGE AT OTHER TIMES

The Solicitor-General: I beg to move amendment No. 112, in page 87, line 41, after `benefit)', insert
'or section 97 of the Finance Act 1981 (grant of tenancies of agricultural property)'.

Mr. Deputy Speaker: With this we may take Government amendment No. 113.

The Solicitor-General: The amendments ensure that there will be no proportionate or flat rate charge to tax when trustees of a discretionary trust of a special trust grant a lease of agricultural property, so long as the grant is for full consideration.

Amendment agreed to.

Clause 107

PROPERTY LEAVING TEMPORARY CHARITABLE TRUSTS

Amendment made: No. 113, in page 93, line 32, after `benefit)' insert
or section 97 of the Finance Act 1981 (grant of tenancies of agricultural property)'.—[Mr. Wakeham.]

Clause 108

PROPERTY BECOMING COMPRISED IN MAINTENANCE FUNDS

Amendment made: No. 114, in page 94, line 34, leave out clause 108.—[Mr. Wakeham.]

Clause 109

PROPERTY LEAVING MAINTENANCE FUNDS

Amendment made: No. 115, in page 96, line 11, leave out clause 109.—[Mr. Wakeham.]

Clause 110

ACCUMULATION AND MAINTENANCE TRUSTS

Mr. Straw: I beg to move amendment No. 116, in page 98, line 2, leave out paragraph (a).
The purpose of the amendment is to make subject to a charge to tax the situation when a beneficiary becomes entitled to property in a trust or to interest in possession within a trust in a settlement where he attains the entitlement before the age of 25.
Clause 110 is about accumulation and maintenance trusts, which may be better known, at least to my hon. Friends, as discretionary trusts for children. They arise as a legitimate device. Property cannot be passed absolutely to minors, and it becomes desirable to settle it on trusts. The usual procedure is to settle it on trust, by which some income can be used for the education and maintenance of potential beneficiaries, with the rest being accumulated and becoming settled on the beneficiaries, often at the age of 25 or on marriage. Concessions were originally made on the tax treatment of such trusts under the capital transfer tax legislation of 1975. They were tightened, in 1976.
The result of the labours of Lord Cockfield is that the law relating to the tax treatment of discretionary trusts, described in the Finance Bill as settlements without "interest in possession", has now been recast, in particular so that there is generally no exit charge when property leaves the trust. However, at the same time as this recasting has taken place there has been a substantial reduction in capital transfer tax applicable both to transfers on death and to lifetime transfers.
Labour Members have become increasingly unhappy about the additional exemptions that are made for accumulation and maintenance trusts, so much so that now no tax is to be charged, if the House approves subsection


(4)(a) of clause 110, when the property is passed to a beneficiary and he becomes beneficially entitled to that or to an interest in possession in respect of the property.
We had a brief discussion on the matter in Committee when we debated what at that time was clause 86. As a result of an explanation from the Solicitor-General about a paving clause in the Bill relating to the definition of relevant property, we withdrew the amendment.
We have given considerable thought to the desirability of allowing this concession to remain in the body of the Bill, but, in view of the substantial recasting of the law relating to discretionary trusts and the overall substantial reduction of capital transfer tax for these trusts and for other transfers, we do not consider that this further exemption is desirable. That is why we have tabled the amendment.

The solicitor-General: The hon. Member for Blackburn (Mr. Straw) is quite right when he says that the law relating to capital transfer tax on discretionary trusts has been substantially recast. He is also right when he says that there is no longer an exit charge, although it is important to remember that there is a proportionate charge when funds leave the trust. It is not that the exit charge has been done away with and not replaced by anything at all.
I shall limit my remarks to what the hon. Gentleman said about the accumulation of maintenance trusts. I respectfully suggest to him and to the House that what is being done need not give rise to the concern that he expressed. In fact, it does not change anything.
There are two exceptions from the charge that arises when property ceases to be held on accumulation of maintenance trusts. These are paragraphs (a) and (b) of the subsection to which the amendment relates, and the amendment relates to the first paragraph only—that is, the exception that applies when a beneficiary of the trust becomes beneficially entitled to the property, or to an interest in possession in it, on or before attaining the age of 25. That is similar to the exemption under the existing legislation, which is paragraph 15(2)(a) of schedule 5 to the Finance Act 1975.
The special reliefs are designed to ensure that, for capital transfer tax purposes, gifts to infants are treated no more harshly than gifts to adults. I realise that I said that in Committee, but I repeat it because it is the substance of the argument. It is not always possible or wise to make an outright gift to an infant. The gift would normally be deferred until the infant attains a specified age, which is commonly the age of majority, and the property would be technically held in discretionary trust. But for the special reliefs, a gift made to an infant in that way would be subject to a tax charge when the property went into the discretionary trust, and again when it came out of the trust. On the other hand, a gift to an adult would not suffer the second charge.
The Government, like the Labour Government who introduced this relief, take the view that a gift to an infant that is deferred until he reaches the appropriate age—often 25—should be treated in broadly the same way as a outright gift to an adult. The exemption from the charge when the beneficiary becomes beneficiary in title to the property or to an interest in possession in it on or before attaining the specified age is necessary to achieve that objective. If the beneficiary took the property at the

specified age, there would be no further tax until he died or gave the property away. The same is true of a direct gift to an adult beneficiary.
The hon. Gentleman was good enough to refer to some tightening of the other provisions relating to the trusts. The one point that arises on the amendment is that without this relief money settled on an infant would pay tax on the way in and on the way out, whereas a gift to an adult would pay tax once only. It is necessary to balance the two.

Question put, That the amendment be made:—

The House divided: Ayes 212, Noes 308.

Division No. 271]
[10.26 pm


AYES


Abse, Leo
Evans, Ioan (Aberdare)


Adams, Allen
Ewing, Harry


Allaun, Frank
Faulds, Andrew


Anderson, Donald
Field, Frank


Archer, Rt Hon Peter
Flannery, Martin


Ashley, Rt Hon Jack
Fletcher, Ted (Darlington)


Ashton, Joe
Ford, Ben


Atkinson, N. (H'gey,)
Forrester, John


Bagier, Gordon A.T.
Foster, Derek


Barnett, Guy (Greenwich)
Foulkes, George


Barnett, Rt Hon Joel (H'wd)
Fraser, J. (Lamb'th, N'W'd)


Benn, Rt Hon Tony
Freeson, Rt Hon Reginald


Bennett, Andrew (St'kp't N)
Garrett, John (Norwich S)


Bidwell, Sydney
Garrett, W. E. (Wallsend)


Booth, Rt Hon Albert
Golding, John


Boothroyd, Miss Betty
Gourlay, Harry


Bray, Dr Jeremy
Graham, Ted


Brown, Hugh D. (Provan)
Hamilton, James (Bothwell)


Brown, Ron (E'burgh, Leith)
Hamilton, W. W. (C'tral Fife)


Buchan, Norman
Hardy, Peter


Callaghan, Rt Hon J.
Harrison, Rt Hon Walter


Callaghan, Jim (Midd't'n &amp; P)
Hart, Rt Hon Dame Judith


Campbell, Ian
Hattersley, Rt Hon Roy


Campbell-Savours, Dale
Haynes, Frank


Canavan, Dennis
Heffer, Eric S.


Cant, R. B.
Hogg, N. (E Dunb't'nshire)


Carmichael, Neil
Holland, S. (L'b'th, Vauxh'll)


Carter-Jones, Lewis
Home Robertson, John


Clark, Dr David (S Shields)
Homewood, William


Clarke, Thomas C'b'dge, A'rie
Hooley, Frank


Cocks, Rt Hon M. (B'stol S)
Howell, Rt Hon D.


Cohen, Stanley
Hoyle, Douglas


Coleman, Donald
Huckfield, Les


Concannon, Rt Hon J. D.
Hughes, Mark (Durham)


Cook, Robin F.
Hughes, Robert (Aberdeen N)


Cowans, Harry
Hughes, Roy (Newport)


Cox, T. (W'dsw'th, Toot'g)
Janner, Hon Greville


Craigen, J. M. (G'gow, M'hill)
Jay, Rt Hon Douglas


Crowther, Stan
John, Brynmor


Cryer, Bob
Johnson, James (Hull West)


Cunningham, Dr J. (W'h'n)
Jones, Rt Hon Alec (Rh'dda)


Dalyell, Tam
Jones, Barry (East Flint)


Davidson, Arthur
Kaufman, Rt Hon Gerald


Davies, Rt Hon Denzil (L'lli)
Kerr, Russell


Davis, Clinton (Hackney C)
Kilroy-Silk, Robert


Davis, Terry (B'ham, Stechf'd)
Kinnock, Neil


Deakins, Eric
Lambie, David


Dean, Joseph (Leeds West)
Lamond, James


Dewar, Donald
Leadbitter, Ted


Dixon, Donald
Lestor, Miss Joan


Dobson, Frank
Lewis, Ron (Carlisle)


Dormand, Jack
Litherland, Robert


Douglas, Dick
Lofthouse, Geoffrey


Dubs, Alfred
McCartney, Hugh


Duffy, A. E. P.
McDonald, Dr Oonagh


Dunlop, John
McElhone, Frank


Dunnett, Jack
McGuire, Michael (Ince)


Dunwoody, Hon Mrs G.
McKay, Allen (Penistone)


Eadie, Alex
McKelvey, William


Eastham, Ken
MacKenzie, Rt Hon Gregor


Edwards, R. (W'hampt'n S E)
McNamara, Kevin


Ellis, R. (NE D'bysh're)
McTaggart, Robert


English, Michael
McWilliam, John


Ennals, Rt Hon David
Marks, Kenneth






Marshall, Dr Edmund (Goole)
Shore, Rt Hon Peter


Marshall, Jim (Leicester S)
Short, Mrs Renée


Marshall, Michael (Arundel)
Silkin, Rt Hon J. (Deptford)


Martin, M (G'gow S'burn)
Silverman, Julius


Mason, Rt Hon Roy
Skinner, Dennis


Maxton, John
Smith, Rt Hon J. (N Lanark)


Maynard, Miss Joan
Soley, Clive


Meacher, Michael
Spearing, Nigel


Mikardo, Ian
Spriggs, Leslie


Millan, Rt Hon Bruce
Stallard, A. W.


Miller, Dr M. S. (E Kilbride)
Stoddart, David


Mitchell, Austin (Grimsby)
Stott, Roger


Morris, Rt Hon A. (W'shawe)
Strang, Gavin


Morris, Rt Hon C. (O'shaw)
Straw, Jack


Morton, George
Summerskill, Hon Dr Shirley


Moyle, Rt Hon Roland
Taylor, Mrs Ann (Bolton W)


Newens, Stanley
Thomas, Dr R. (Carmarthen)


Oakes, Rt Hon Gordon
Thorne, Stan (Preston South)


O'Neill, Martin
Tilley, John


Palmer, Arthur
Tinn, James


Park, George
Torney, Tom


Parker, John
Urwin, Rt Hon Tom


Parry, Robert
Varley, Rt Hon Eric G.


Pavitt, Laurie
Wainwright, E. (Dearne V)


Pendry, Tom
Walker, Rt Hon H. (D'caster)


Powell, Raymond (Ogmore)
Weetch, Ken


Prescott, John
Welsh, Michael


Price, C. (Lewisham W)
White, Frank R.


Race, Reg
White, J. (G'gow Pollok)


Radice, Giles
Whitehead, Phillip


Rees, Rt Hon M (Leeds S)
Whitlock, William


Richardson, Jo
Williams, Rt Hon A. (S'sea W)


Roberts, Albert (Normanton)
Wilson, Gordon (Dundee E)


Roberts, Allan (Bootle)
Wilson, Rt Hon Sir H. (H'ton)


Roberts, Ernest (Hackney N)
Wilson, William (C'try SE)


Roberts, Gwilym (Cannock)
Winnick, David


Robertson, George
Woodall, Alec


Robinson, G. (Coventry NW)
Woolmer, Kenneth


Rooker, J. W.
Wright, Sheila


Ross, Ernest (Dundee West)
Young, David (Bolton E)


Rowlands, Ted



Sever, John
Tellers for the Ayes:


Sheerman, Barry
Mr. Lawrence Cunliffe and


Sheldon, Rt Hon R.
Mr. Ron Leighton


NOES


Adley, Robert
Brinton, Tim


Aitken, Jonathan
Brittan, Rt. Hon. Leon


Alexander, Richard
Brotherton, Michael


Alison, Rt Hon Michael
Brown, Michael (Brigg &amp; Sc'n)


Alton, David
Brown, Ronald W. (H'ckn'y S)


Ancram, Michael
Browne, John (Winchester)


Arnold, Tom
Bruce-Gardyne, John


Aspinwall, Jack
Bryan, Sir Paul


Atkins, Rt Hon H. (S'thorne)
Buchanan-Smith, Rt. Hon. A.


Atkins, Robert (Preston N)
Buck, Antony


Atkinson, David (B'm'th,E)
Budgen, Nick


Baker, Nicholas (N Dorset)
Bulmer, Esmond


Banks, Robert
Burden, Sir Frederick


Beaumont-Dark, Anthony
Butcher, John


Beith, A. J.
Butler, Hon Adam


Bendall, Vivian
Cadbury, Jocelyn


Bennett, Sir Frederic (T'bay)
Carlisle, John (Luton West)


Benyon, Thomas (A'don)
Carlisle, Kenneth (Lincoln)


Benyon, W. (Buckingham)
Carlisle, Rt Hon M. (R'c'n)


Berry, Hon Anthony
Chalker, Mrs. Lynda


Best, Keith
Channon, Rt. Hon. Paul


Bevan, David Gilroy
Chapman, Sydney


Biffen, Rt Hon John
Churchill, W. S.


Biggs-Davison, Sir John
Clark, Hon A. (Plym'th, S'n)


Blackburn, John
Clark, Sir W. (Croydon S)


Blaker, Peter
Clarke, Kenneth (Rushcliffe)


Body, Richard
Clegg, Sir Walter


Bonsor, Sir Nicholas
Cockeram, Eric


Boscawen, Hon Robert
Colvin, Michael


Bottomley, Peter (W'wich W)
Cope, John


Bowden, Andrew
Cormack, Patrick


Boyson, Dr Rhodes
Corrie, John


Braine, Sir Bernard
Costain, Sir Albert


Bright, Graham
Cranborne, Viscount





Crawshaw, Richard
Knight, Mrs Jill


Critchley, Julian
Knox, David


Crouch, David
Lamont, Norman


Dorrell, Stephen
Lang, Ian


Douglas-Hamilton, Lord J.
Latham, Michael


Dover, Denshore
Lee, John


du Cann, Rt Hon Edward
Lennox-Boyd, Hon Mark


Dunn, Robert (Dartford)
Lester, Jim (Beeston)


Durant, Tony
Lewis, Kenneth (Rutland)


Eden, Rt Hon Sir John
Lloyd, Ian (Havant &amp; W'loo)


Edwards, Rt Hon N. (P'broke)
Lloyd, Peter (Fareham)


Eggar, Tim
Loveridge, John


Elliott, Sir William
Luce, Richard


Eyre, Reginald
Lyell, Nicholas


Fairbairn, Nicholas
Lyons, Edward (Bradf'd W)


Fairgrieve, Sir Russell
Macfarlane, Neil


Faith, Mrs Sheila
MacGregor, John


Farr, John
MacKay, John (Argyll)


Fell, Sir Anthony
Macmillan, Rt Hon M.


Fenner, Mrs Peggy
McNair-Wilson, M. (N'bury)


Finsberg, Geoffrey
McNair-Wilson, P. (New F'st)


Fisher, Sir Nigel
McNally, Thomas


Fletcher, A. (Ed'nb'gh N)
Madel, David


Fletcher-Cooke, Sir Charles
Major, John


Fookes, Miss Janet
Marland, Paul


Forman, Nigel
Marten, Rt Hon Neil


Fowler, Rt Hon Norman
Mather, Carol


Fox, Marcus
Maude, Rt Hon Sir Angus


Fraser, Peter (South Angus)
Mawby, Ray


Fry, Peter
Mawhinney, Dr Brian


Gardner, Edward (S Fylde)
Maxwell-Hyslop, Robin


Garel-Jones, Tristan
Mayhew, Patrick


Glyn, Dr Alan
Mellor, David


Goodhew, Sir Victor
Meyer, Sir Anthony


Goodlad, Alastair
Miller, Hal (B'grove)


Gorst, John
Mills, Iain (Meriden)


Gow, Ian
Mills, Sir Peter (West Devon)


Grant, Anthony (Harrow C)
Miscampbell, Norman


Gray, Hamish
Mitchell, David (Basingstoke)


Greenway, Harry
Moate, Roger


Griffiths, E. (B'y St. Edm'ds)
Monro, Sir Hector


Griffiths, Peter Portsm'th N)
Montgomery, Fergus


Grylls, Michael
Moore, John


Gummer, John Selwyn
Morris, M. (N'hampton S)


Hamilton, Michael (Salisbury)
Morrison, Hon C. (Devizes)


Hampson, Dr Keith
Morrison, Hon P. (Chester)


Hannam,John
Mudd, David


Haselhurst, Alan
Murphy, Christopher


Havers, Rt Hon Sir Michael
Myles, David


Hawkins, Sir Paul
Neale, Gerrard


Hawksley, Warren
Needham, Richard


Hayhoe, Barney
Nelson, Anthony


Heddle, John
Neubert, Michael


Henderson, Barry
Newton, Tony


Heseltine, Rt Hon Michael
Normanton, Tom


Hicks, Robert
Ogden, Eric


Higgins, Rt Hon Terence L.
Onslow, Cranley


Hill, James
Oppenheim, Rt Hon Mrs S.


Hogg, Hon Douglas (Gr'th'm)
Osborn, John


Holland, Philip (Carlton)
Page, John (Harrow, West)


Hooson, Tom
Page, Richard (SW Herts)


Horam, John
Parkinson, Rt Hon Cecil


Hordern, Peter
Parris, Matthew


Howell, Rt Hon D. (G'ldf'd)
Patten, John (Oxford)


Howell, Ralph (N Norfolk)
Pattie, Geoffrey


Howells, Geraint
Pawsey, James


Hunt, David (Wirral)
Penhaligon, David


Hunt, John (Ravensbourne)
Percival, Sir Ian


Irvine, Bryant Godman
Peyton, Rt Hon John


Irving, Charles (Cheltenham)
Pink, R. Bonner


Jenkin, Rt Hon Patrick
Pollock, Alexander


Jessel, Toby
Porter, Barry


Johnson Smith, Sir Geoffrey
Prentice, Rt Hon Reg


Jopling, Rt Hon Michael
Price, Sir David (Eastleigh)


Joseph, Rt Hon Sir Keith
Prior, Rt Hon James


Kaberry, Sir Donald
Proctor, K. Harvey


Kellett-Bowman, Mrs Elaine
Raison, Rt Hon Timothy


Kershaw, Sir Anthony
Rees-Davies, W. R.


Kimball, Sir Marcus
Renton, Tim


King, Rt Hon Tom
Rhodes James, Robert






Rhys Williams, Sir Brandon
Skeet, T. H. H.


Ridley, Hon Nicholas
Smith, Cyril (Rochdale)


Rifkind, Malcolm
Smith, Dudley


Rippon, Rt Hon Geoffrey
Smith, Tim (Beaconsfield)


Roberts, M. (Cardiff NW)
Speed, Keith


Roberts, Wyn (Conway)
Speller, Tony


Rodgers, Rt Hon William
Spence, John


Roper, John
Spicer, Jim (West Dorset)


Ross, Stephen (Isle of Wight)
Spicer, Michael (S Worcs)


Rossi, Hugh
Sproat, Iain


Rost, Peter
Squire, Robin


Rumbold, Mrs A. C. R.
Stainton, Keith


Sainsbury, Hon Timothy
Stanley, John


St. John-Stevas, Rt Hon N.
Steel, Rt Hon David


Scott, Nicholas
Steen, Anthony


Shaw, Giles (Pudsey)
Stevens, Martin


Shelton, William (Streatham)
Stewart, A. (E Renfrewshire)


Shepherd, Colin (Hereford)
Stewart, Ian (Hitchin)


Shepherd, Richard
Stokes, John


Shersby, Michael
Stradling Thomas, J.


Silvester, Fred
Tapsell, Peter


Sims, Roger
Taylor, Teddy (S'end E)

Question accordingly negatived.

Clause 114

PROPERTY BECOMING HELD FOR CHARITABLE PURPOSES OR BY EXEMPT BODIES

Amendments made: No. 117, in page 101, line 25, leave out '109'.

No. 118, in page 101, line 25 at end add
'or paragraph 2 of Schedule (Capital transfer tax: maintenance funds) to this Act'.—[Mr. Brooke.]

Clause 118

PROPERTY BECOMING SETTLED ON A DEATH

The Solicitor-General: I beg to move amendment No. 119, in page 104, line 17 leave out from 'settlement' to 'shall' in line 19 and insert
'in pursuance of a will or intestacy'.

Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to take amendment No. 120.

The Solicitor-General: These two essentially drafting amendments are designed to ensure that clause 118 produces the effect that was intended—that a settlement that comes into existence on a person's death, typically a settlement set up by will, will have as its commencement date the date of the settler's death.

Amendment agreed to.

Amendment made: No. 120 in page 104, line 20, leave out from 'it' to end of line and insert:
'on the death of the testator or intestate (whether it occurred before or after the passing of this Act)'.—[Mr. Brooke.]

Schedule 14

CAPITAL TRANSFER TAX: SETTLEMENTS COMMENCING BEFORE 27TH MARCH 1974

The Solicitor-General: I beg to move amendment No.121 in page 188, line 41 after 'this', insert 'Part of this'.
This is a purely drafting amendment designed to achieve greater clarity.

Amendment agreed to.

Amendments made: No. 182, in page 191, line 5 leave out from '1984' to 'except' in line 7 and insert:
'an event occurs in respect of the settlement which could not have occurred'.

No. 183, in page 191, line 9 leave out 'payment constitutes an event' and insert:
'event is one'.

No. 184, in page 191, line 21 leave out from '1984' to 'except' in line 23 and insert:
'an event occurs in respect of the settlement which could not have occurred'.

No. 185, in page 191, line 25 leave out 'payment constitutes an event' and insert:
'event is one'.—[Mr. Brooke.]

Schedule 15

CAPITAL TRANSFER TAX SETTLEMENTS WITHOUT INTERESTS IN POSSESSION

The Solicitor-General: I beg to move amendment No. 122 in page 193, line 9, at end insert—
'(c) in sub-paragraph (7) after the words "section 78" there shall be inserted the words "or 82(3)".'.

Mr. Deputy Speaker: With this it is convenient to take amendments Nos. 123, 124 and Nos. 128 to 136.

The Solicitor-General: These amendments provide the necessary rules relating to liability, accountability, the due date for payment of tax and interest on tax in relation to the special flat rate charge for tax that would apply in certain circumstances to national heritage property that has been acquired by trustees and discretionary trusts.

Mr. Tim Eggar: Amendment No. 135 is the Government's response to a debate in Committee when I proposed an amendment on behalf of the heritage lobby. The Government have accepted the point that was made, but I wish to raise the question of the magnitude of the charge that should be brought down on the recipient of heritage property distributed under what is known as conditional exemption by trustees if the recipient breaches his undertakings to maintain, repair, preserve and show the property to the public.
As the Bill is drafted, the full charge is exacted even though the charge conditionally exempted cannot be more than 30 per cent. of the full charge. In most cases, it will be much lower. The Government amendment reduces the charge to 30 per cent., or 60 per cent. of the full charge, or retains it as a full charge. Which of these is chosen depends on complex arrangements that I shall not discuss now. The approach that the Government have put forward is somewhat illogical. Because the charge increases with time, the taking of conditional exemption will be inhibited.
This is too blunt an instrument. It is a slightly disappointing response by the Government to the point made in Committee. I recognise that this is an extremely complex matter. I have already supplied the Solicitor-General with an amendment. I recognise that there is no chance that it can be introduced this year. I hope, however, that my hon. and learned Friend will consider it and possibly return to the matter next year.

The Solicitor-General: My hon. Friend suggests that the solution adopted in amendment No. 135 is a blunt instrument. He implies that the reductions to 30 per cent. and 60 per cent. of the full senior's rate are not sufficiently precise. I accept that the percentage reductions are deliberately simple. To attempt anything more elaborate runs the risk of considerable complications that would be difficult to justify on a comparatively narrow point. My hon. Friend has kindly given me a copy of suggested alternative provisions. I have had just long enough to look at them and take advice. My reference to possible complications is well illustrated by the alternative provisions. Although they have been prepared, I have no doubt, by knowledgeable experts, they are remarkably complicated and deficient in at least two respects, which I shall be happy to import to my hon. Friend afterwards.
In response to what my hon. Friend says, I am prepared to agree that the matter should be considered further. My hon. Friend is right that it is too late to do anything about it. I give the undertaking that the matter will be looked at further without any commitment as to the result. I suggest that the obvious course is for representatives of the lobby that put forward those points to enter into discussions immediately with the appropriate officials. Between us all, perhaps we can find the best answer.

Mr. Eggar: Not only is the instrument somewhat blunt, but the amount of tax is being raised over and above what it was before the amendment was tabled. I am sure that the members of the heritage lobby would also want to discuss that with my hon. and learned Friend.

Sir Ian Percival: I do not think that my hon. Friend is right in that proposition. However, if he is, of course that will be another matter to be considered. Meanwhile, I commend the amendments to the House.

Amendment agreed to.

Amendments made: No. 123, in page 193, line 22 at end insert—
'9A. In paragraph 12(4) of that Schedule after the words "section 78" there shall be inserted the words "or 82(3).".'.

No. 124, in page 193, line 38 at end insert—
'11A. In paragraph 19(1)(c) of that Schedule after the words "section 78" there shall be inserted the words "or 82(3)".'.

No. 125, in page 194, line 3 at end insert—
'14A. In paragraph 16(6) of that Schedule, for the words from the beginning to "settlement is" there shall be substituted the words "Where a benefit has become payable under a fund or scheme to which this paragraph applies, and the benefit becomes comprised in a settlement".'.

No. 126, in page 194, line 30 at end insert—
'16A. In paragraph 4 of Schedule 10 to that Act, for sub-paragraph (2) there shall be substituted—
(2) Sub-paragraph (1) above shall not apply where the chargeable transfer is made under Schedule 5 to this Act or under Chapter II of Part IV of the Finance Act 1982 and the gain accrues to the trustees of the settlement; but if in such a case any capital gains tax chargeable on the gain is borne by a person who becomes absolutely entitled to the settled property concerned, the amount of the tax so borne shall be treated as reducing the value transferred by the chargeable transfer".'.

No. 127, in page 194, line 31 leave out
'Schedule 10 to that Act'
and insert 'that Schedule'.

No. 128, in page 195, line 6 leave out '(7A)' and insert '(8)'.

No. 129, in page 195, line 7 at end insert—
'(9) Subsection (1)(b) above shall have effect subject to section 82A(6) and (7) below.'

No. 130, in page 195, line 29 leave out from beginning to end of line 32 and insert—
'(2) References in subsections (3) and (4) below and in sections 82, 82A and 83 below to a conditionally exempt occasion are to—

(a) a transfer or event which by virtue of subsection (1) above does not constitute an occasion on which tax is chargeable under the Chapter there mentioned;
(b) a conditionally exempt distribution (within the meaning given by this subsection as it had effect in relation to events before 9th March 1982).'.

No. 131, in page 196, line 48 at end insert—
'(3A) Tax shall not be charged under subsection (3) above in respect of property if, after the occasion and before the occurrence there mentioned, there has been a conditionally exempt occasion in respect of the property.'.

No. 132, in page 197, line 5 after 'quarters', insert
'(that is, periods of three months)'.

No. 133, in page 197, line 20 at end insert—
'(6A) The persons liable for tax in respect of a charge under subsection (3) above are—

(a) the trustees of the settlement; and
(b) any person for whose benefit any of the property or income from it is applied at or after the time of the event occasioning the charge.'.

No. 134, in page 197, line 41 at end insert—
'(9) In this section "ten-year anniversary" in relation to a settlement has the same meaning as in Chapter II of Part IV of the Finance Act 1982.'

No. 135, in page 198, line 31 at end insert—

'(6) If the last transaction regarding property before a chargeable event was a conditionally exempt occasion, and the relevant person died before 13th March 1975, section 79(1)(b)(ii) above shall (subject to subsection (7) below) be taken to read as follows:—
(ii) the rate or rates that would have applied to that amount ('the chargeable amount') under the appropriate Table in that section if the relevant person had died when the chargeable event occurred, the value transferred on his death had been equal to the amount on which estate duty was chargeable when he in fact died, and the chargeable amount had been added to that value and had formed the highest part of it.
(7) If the last transaction regarding property before a chargeable event was a conditionally exempt occasion, the rate (or each of the rates) mentioned in section 79(1)(b)(i) or (ii) above—

(a) shall, if the occasion occurred before the first ten-year anniversary to fall after the property became comprised in the settlement concerned, be 30 per cent. of what it would be apart from this subsection; and
(b) shall, if the occasion occurred after the first and before the second ten-year anniversary to fall after the property became so comprised, be 60 per cent. of what it would be apart from this subsection.

and in this subsection "ten-year anniversary" in relation to a settlement has the same meaning as in Chapter II of Part IV of the Finance Act 1982.'.

No. 136, in page 198, line 31, at end insert—
'22A. In section 83 of that Act, after subsection (3) there shall be inserted—
(3A) References in subsection (3) above to a conditionally exempt transfer of property include references to a conditionally exempt occasion in respect of property.".'.

No. 137, in page 198, line 31, at end insert—
'22A. For subsection (8) of section 114 of that Act there shall be substituted—
(8) This section shall apply to occasions on which tax is charegable under section 102 of the Finance Act 1982 in cases within paragraph 5 of Schedule 14 to that Act in the same way as it applies to transfers of value; and for this purpose references in this section to transfers made by the same person shall be construed as references to occasions relating to, or distribution payments made out of property comprised in, the same settlement.".'.

No. 138, in page 199, line 15, at end insert—
'25A. For paragraph 6 of that Schedule there shall be substituted—
6. Where tax is chargeable under paragraph 2 of Schedule (Capital transfer tax: maintenance funds) to the Finance Act 1982 on any occasion after a reduction and the rate at which it is charged falls to be determined under paragraph 8 of that Schedule by reference to a death which occurred before that reduction (or before that and one or more previous reductions) that paragraph shall apply as if the Tables in section 37(3) as substituted by that reduction had been in force at the time of the death.".'.—[The Solicitor-General.]

Clause 126

MAINTENANCE FUNDS FOR HISTORIC BUILDINGS

Amendments made: No. 139, in page 107, line 4, leave out
'section 108(5) or 109(3) of'
and insert
'paragraph 1(5) or 3(1) of Schedule (Capital transfer tax: maintenance funds) to'.

No. 140, in page 107, line 7, leave out
'section 108(9) of that Act'
and insert
`paragraph 1(8) or 3(4) of that Schedule'.—[The Solicitor-General.]

Clause 129

ALTERNATIVE VALUATION OF ETHANE USED FOR PETROCHEMICAL PURPOSES

Mr. Robert Sheldon: I beg to move amendment No. 159, in page 108, line 6, leave out clause 129.

Mr. Deputy Speaker: With this it will be convenient to take amendment No. 187, in page 199, line 31, leave out schedule 16.

Mr. Sheldon: Clause 129 covers the alternative valuation of ethane used for petrochemical purposes. We debated that matter late in the Bill. Many changes were made in the clause. The amendments were large and numerous. The clause was taken at the end of the Finance Bill debate, which was an unusual procedure, because of the late consultations that were taking place.
The reason that we have sought to bring back the matter on Report is the great disquiet that we have seen as a result of Imperial Chemical Industries suing the Government over certain matters concerned with clause 129. We thought it right that those matters, so recently discussed and debated in Committee, ought to be brought forward for further examination in the light of subsequent events.
When we discussed the matter in Committee, the Minister of State said that he would use the period between the Committee debate and our return to the Floor of the House to consult ICI and the oil industries in an attempt to find a solution that was acceptable to both. There is a great deal of unease that the Government are favouring one company rather than another. The House naturally must be concerned about the demand for equity between the oil companies on the one hand and the chemical industry, in this case ICI, on the other hand. Clause 119, as it then was in Standing Committee, extended oil taxation to mixed gases. As a result of developments in Scotland and elsewhere, Shell, Esso and BP have their own ethane and can transfer it to chemical operations.
The substantial question that was before the Committee and still remains before the House is: how do we value internal transactions upon which PRT and corporation tax will be raised? Because those taxes are involved, a large sum of money is in question. The normal method of valuation—market price—is denied to us because of the restricted outlet of ethane gas. The valuation as decided by the Treasury and the Inland Revenue was to be based on a formula that was to be revealed in confidence to the Inland Revenue. That is natural enough and we understand the reasons for it. These matters are not generally disclosed. But ICI is at some disadvantage because it does not know the basis of costing and, therefore, the basis of taxation. We understand the problems that are involved.
Shell is an important part of the groups that are developing the projects. It has its own ethane cracker project which has been developed over several years. Shell and Esso, as developers of the Brent field, had to find a secure outlet for ethane from that field. The feedstock necessary to establish the project was not to be bought from an independent supplier but to be provided by an affiliated company. The attempt to discover a suitable method for obtaining a suitable transfer price is the major cause of the problem as we see it.
Ethane can be valued as a fuel. That is one of the solutions that ICI advanced. The Government believe that

that is one of the problems to which they have discovered the solution. I wish that that were so. ICI does not agree that the Government have discovered the solution. The Government have failed to convince ICI that the solution is fair to it and the oil companies.
ICI was also worried about the lack of certainty about a sufficiently frequent examination of the pricing formula which would decide price in the absence of the market price. Despite what the Minister may say, all parties agree that it will be difficult to estimate a price for ethane. The formula that will be determined in agreement with the Inland Revenue will not be revealed to ICI. It may therefore feel that it may be discriminated against. That may not be so, but ICI can not say with certainty that it is operating competitively in a fair and open market.
The price of the feedstock that ICI uses is known with certainty. Anyone can establish its commercial price. The price of its competitors' feedstock will not be known quite so clearly. If ICI is beaten on price, it will not know whether that is because the feedstock has been valued at a lower price, whether its competitors' plant is more efficient or whether it is operating at a loss. Those considerations are not normally found in the commercial world. ICI therefore believes that it has a grievance which it has brought to the attention of hon. Members.
A number of important companies in which the Government have an important interest are in conflict. That is the great problem. The companies are important for the development of the economy of various parts of the country and for the jobs and the progress that they can bring. It is no happy solution to try to find a compromise, as the Minister did, only to have it rejected by a major part of the petrochemcial industry. As a result, an important national company—ICI—is now suing the Government in a situation that is entirely without precedent.

Mr. Eggar: Is the right hon. Gentleman coming to the view that ICI should have the right to decide whether the Government introduce the clause and thus perhaps to gain a competitive advantage over a rival and possibly to jeopardise jobs at Moss Morran?

Mr. Sheldon: I am certainly not saying that. The important consideration is that there are two types of development. Our task is to retain both the one that is already in existence and the one that is in development. ICI feels that arrangements may be reached between the Inland Revenue and the companies in secret and unannounced—I do not deny that there are good reasons for that—which might have a serious effect not just on ICI's profits but on its very viability. The Minister must therefore seek to assure both ICI and the oil companies as well as the House on that point.
The Minister gave an undertaking in Committee that there would be discussions. We hoped to arrive at a solution that would be seen to be fair between the various companies and would be accepted by them. Unfortunately, he has failed to do so. Nevertheless, a solution is clearly needed and we believe that it is possible to find an arrangement of the kind that we discussed in Committee which would be acceptable to the various groups, perhaps on the lines of the Shell suggestion. That might meet the requirements of ICI. Shell suggested that the proposed forward estimate of the value of the ethane being transferred into the petrochemical plant should accord with


the kind of pricing formula that one would expect between two independent companies. That is similar to the solution suggested by ICI.
I think that if the Minister pursues that line of thought he may find a solution. I hold the Government responsible in these matters. They had the basis for a compromise and an agreement of enormous concern to two very important parts of the country where jobs and progress are vital. He owes it to the House to try to find a solution in that way. I hope that he will do so. I regret that he has not done so in the time that was available to him.

Mr. Harry Ewing: I declare an interest at once. The amendment proposed by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) would have serious repercussions for my constituency and certainly for the development of the Shell-Esso plant at Moss Morran.
If any Member of Parliament thinks for one moment that we can please the chemical companies with some legislative proposal or compromise agreed among ourselves in the House, the experience of each and every one of us should prove the contrary. I hold no brief for any of them. My brief is to protect employment, not just in my constituency, or even just in Scotland and the North-East, but throughout the United Kingdom.
I do not accept that the proposal that the clause should be withdrawn from the Bill will protect unemployment, and for that reason I am against it. My experience of chemical companies is that, whatever we do for them, we then come up with another excuse for doing something further to assist them with the problems that they present to us from time to time.

11 pm

Mr. Dick Douglas: Especially ICI.

Mr. Ewing: I have also had the experience of BP in my constituency. I hold no brief for any of the companies. The House must decide whether the Government's proposals at this stage in the development of Moss Morran, against the background of British Petroleum's investment decisions announced last week, should be accepted to allow those developments to proceed. If the clause is withdrawn, the investment decisions announced last week will be cancelled and there will be a serious danger—some of my hon. Friends will speak to this—that the development at Moss Morran will also be stopped.
As to the difference in the feedstocks, British Petroleum has also used naptha at its Baglan Bay cracker, so it has an interest in preserving a viable naptha cracking market in the United Kingdom. BP also has an interest in the Stockton-on-Tees cracker. The problem arises because of the new chemical feedstock that is due to come on stream in 1983—ethane from the North Sea.
It is all very well for ICI to say, in the document sent to hon. Members, that perhaps the answer is to remove the clause from this year's Finance Bill and to return in 1983 with alternative proposals. Everyone in industry and commerce knows that massive investment decisions are now being taken to meet the date when the ethane will be available from the North Sea. It will be available to BP at Grangemouth in 1983. The Shell-Esso cracker at Moss Morran is not due to come on stream until 1986, but these

investment decisions are being taken now and the uncertainty created by the removal of the clause would be unacceptable.
The job consequences for Fife, the Central region of Scotland and for the Grangemouth and Moss Morran travel-to-work areas would be serious. I know that my hon. Friends from the North-East of England have had the same experience of job losses in the petrochemical industry, but in the past eight to 10 years we have lost more than 1,000 jobs in the petrochemical industry at Grangemouth. That is the most industrialised part of Scotland. Even the jobs that will be created as a result of the conversion of the cracker at Grangemouth and the construction of the plant at Moss Morran will not compensate for the job loss that we have suffered during the past eight years. Central Scotland and the surrounding area is not the only area to suffer losses. They are prevalent throughout the United Kingdom.
However, that is no reason why ICI should deliberately attempt—however unkind it may be to say so—to prevent the development at Moss Morran. The background is interesting. When it was known that substantial quantities of ethane were available in the North Sea, the proposal was to bring the gas, not into Moss Morran, but to Stockton-on-Tees, to reverse the flow in the joint pipeline that runs between Stockton and Grangemouth and pumps it back to Grangemouth. That is what ICI wanted.
My hon. Friend the Member for Dumfermline (Mr. Douglas) is more of an expert than I am. I am in favour of coming as far south as possible, but I am more strongly in favour of using the chemical feedstuff that has its origin in Scotland being made available to the plants being constructed in Scotland, as well as to the plants in the North-East of England. It ill becomes ICI at this stage in the development of the North Sea gas field to come up with such a rejection of the Government proposals.
The discussions have been going on for some time. There was a hiccup in the development of the Shell-Esso plant at Moss Morran. Everyone thought that it was to do with industrial rates in the Fife region. It had nothing to do with that. It had nothing to do with derating plant and machinery outside buildings, which in Scotland are subject to rating, but which in England and Wales are derated. That is not the problem. The problem is whether it is possible to strike a proper tax margin for ethane gas. That was discussed in October last year. We now have an objection from ICI.
I have a double interest, in that both BP and ICI have plants in my constituency. Although the ICI division at Grangemouth is involved in fibre rather than chemicals, it will feel the consequences of the decision by the House tonight. To suggest that we should withdraw the clause and jeopardise any investment decisions in relation to the Scottish economy is an outrage.
The people of Falkirk, Grangemouth, Stirling, Clackmannan and Fife will be badly affected by the withdrawal of the clause. I hope that my colleagues will not press the issue to a Division, because there is no reason why we should disagree with our colleagues in the North-East of England. I hope that the clause will remain. If we vote, I shall vote in favour of the clause remaining in the Bill, because it is important for the development of the Scottish economy and for the economies of the North-East and other parts of the United Kingdom.

Mr. James Tinn: We are becoming only too accustomed to the dismal exercise of swapping statistics of hardship and unemployment and accounts of the impact of measures, particularly Government measures, in our respective areas. I do not disagree with my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing), or with other hon. Members who may follow, as to the seriousness of job losses and unemployment in Scotland, any more than my hon. Friend and others would question the seriousness of our job losses in the North-East. We are not competing with each other on this level. We regard every case of unemployment as an individual tragedy. At the same time, we have the responsibility of representing our own areas to the best of our ability, and when measures are proposed which are likely, in our view, to worsen the impact of unemployment, it is obviously our duty to do what we can to oppose them.
The impact on my own constituency, where the Wilton plant is situated, can hardly be exaggerated if ICI's fears prove to be justified. The loss of up to 10,000 jobs would be on a scale that we have not seen anywhere in the United Kingdom up to now—not even in my own town of Consett, where 6,000 jobs were lost.
My hon. Friend rightly spoke about the 1,000 job losses in the chemical industry in his area. In steel alone we have lost 10,000 jobs over recent years on Teesside, and we are now called on to envisage the possibility of another 10,000 if ICI's figures are right. That is the question: is ICI right? The Government insist that ICI is wrong and that there is no need to worry about the consequences of the measure.
I have rather more confidence in ICI's ability and its knowledge of its own business, and in its ability to forecast the future and the impact of the measure on the future, than I have in Treasury Ministers, certainly of this Government and perhaps even of previous Labour Administrations. I doubt whether the Treasury has shown such skill and exactitude—.especially when we recall its forecasts in the past—as to allow any of us to place undue confidence in its assurances that in the present case ICI is wrong.
I have read what the Minister of State said in Standing Committee. I understand that the Government are insisting that all they are doing is to correct an existing anomaly in the tax system. I think that the Minister of State said that it makes no difference to the tax revenue. That strikes me as very odd.
I should have thought that Shell, Esso and BP were under the impression that they were getting something from the clause. I should have thought that they were under the impression that it would put some money into their pockets and that they would benefit from it. It is hard to see how they can benefit if there is no impact on the revenue. Have they been kidded along that the measure will do things for them when that is not the case? Or have the Government made a deal with them? Is it right, as has been suggested, that the development at Moss Morran is to be cancelled? Can the Minister confirm that Grangemouth is to go? I would regret it just as much as my hon. Friend. Or has pressure been put on the Government? I would be the last to complain if this Government, who have done it so rarely, were to intervene to protect jobs. But are they? Is that the reason? If they are intervening to protect jobs, presumably a benefit is accruing, and, rightly or wrongly, it is a concession to those companies.
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Is the concession justified? As I understand it. it applies to the ethane transfer from the oil companies through their pipelines—the Flags pipeline—to their subsidiaries. It is argued—no doubt, rightly—that it is not possible to establish a market price. That, I believe, is the heart of the problem that confronts the Government. There are no arm's length sales in the commodity whereby a fair price can be assessed. That has led to the anomaly which the Government seek to rectify.
Before I come to the Government's method of solving the problem, may I ask: is there no other way? In fact, the ethane has an alternative use. It has a use as fuel oil, as well as a use in the petrochemical industry. ICI's suggestion that the price for tax purposes in this transfer to the subsidiaries should be based on the best price for ethane as a fuel oil would not destroy the advantageous position that the plastic producers—the ethylene producers using ethane as their feedstock—at present enjoy. Incidentally, those of us who support the ICI case—and certainly ICI—recognise that ethane has an inherent cost advantage. No one is trying to destroy that. No one is seeking protection against that natural advantage. It is ironical that, had the Government allowed the gas-gathering pipeline to go ahead, ICI would have had access to a supply. At the time when ICI was negotiating for a price for ethane, the oil companies were asking for a premium on its fuel oil cost. They were asking for the fuel oil cost plus, when ICI had thought of getting it through that pipeline. However, that opportunity has gone.
What would the damaging impact of this formula be on the ethane-using plastics producers?

Mr. T. H. H. Skeet: The idea, as I understand it, is that ICI wants to level up the commercial advantage. As there is considerable ethane in the North Sea, it is quite possible for ICI to buy it at some future date. The other installations at Moss Moran are not expected to be in operation between 1982 and 1984. I put it to the hon. Member for Redcar (Mr. Tinn) that ICI has a highly advantageous natural gas contract with the British Gas Corporation, and it is buying its gas very much below 10p per therm. I shall not give the price; I merely say that it is an advantageous price. Fisons, on the other hand, in order to produce ammonia, got rather annoyed about it. There may be fairness or unfairness, but should we take into account the environment and all the circumstances involved?

Mr. Tinn: Of course we should. I have never been tempted by the scent of a red herring and I do not intend to follow the one that the hon. Gentleman has trailed some length across the Floor of the House.
I do not wish to detain the House longer than is necessary, but 10,000 jobs on Teesside are worth a few minutes of our time. I was about to make the point that the alternative pricing formula proposed by ICI based on fuel oil would still leave the ethane-using producers with an advantage. The present price of ethane as a fuel oil is 26p per therm. The price of naphtha, which ICI accepts and makes no complaint about, is 33p per therm. We make no complaint about that advantage, but it seems odd that we should be thinking about giving a further tax concession that it is calculated would amount to £50 per tonne out of every £300—about £17 per tonne in addition to the natural advantage enjoyed by the ethane producers.

Mr. Eggar: rose—

Mr. Tinn: After my last experience, and as I do not wish to detain the House, the hon. Gentleman will forgive me if I do not give way.
The proposal is not necessary, but since the Government seem determined to press it I must turn to consider how it would work. It seems that the oil companies are to be offered the option of electing to submit a formula to the Inland Revenue Board to fix a price for taxation purposes in the absence of a fairly determined market price.
The Minister quoted the relevant passage in Committee on 24 June. He said:
Then paragraph 2(1) makes it clear that an election will be accepted if
'under a relevant contract.… for the sale at arm's length of the ethane to which the election applies, the contract prices would not differ materially from the market values determined in the accordance with the price formula specified in the election; and if the Board are not so satisfied they shall reject the election.—[Official Report, Standing Committee A, 24 June 1982; c. 975.]
If I understand that gobbledegook at all, it imposes on the Board a duty not to accept the formula submitted by the applicants unless it conforms with the Board's estimate of the market price. A moment ago I was expressing my understanding that there is no recognised market price. What will guide the Board in deciding whether the submitted formula is fair and fits in it with the market price when there is no market? I shall be interested to hear the Minister's reply.
I hope that when the oil companies make elections to the Board, other interested parties, such as ICI, will be able to express their views as well. It may well be that the Government will concede that point. If they do, it would be rather like giving a torch to a blind man if ICI have to make its representations in complete ignorance of the formula submitted by the oil companies. How can it argue reasonably about a proposal about which it knows nothing? Why should it be so damaging to the oil companies for the taxed costs of their raw materials to be disclosed? Why should it be such a problem for ICI to know what the oil companies have to pay in tax on their ethane when everyone knows what ICI pays in tax for its naphtha? I find that difficult to understand.
I am also concerned about the five-year review and the long-term stability that seems to be given by it. But, even more important, this concession applied to ethane—mistakenly, we believe—is also to apply to other liquefied petroleum gases such as propane and butane where these are mixed together. Both have a clear market value. None of the problems which it is claimed attach to the valuation of ethane attaches to either of these. What is more, 25 per cent. of ICI's feedstock comes from these liquefied petroleum gases from its Ninian field. On these, ICI pays the full commercial price for tax purposes.
Not only is it proposed that users get what in my view is an unjustified concession on the ethane that they use; they are also to get the concession on the butane and the propane that they use. Twenty-five per cent. of ICI's feedstock intake will be of these gases, and the company will have to pay the full tax on it based on the commercial price.
I make no apology for detaining the House on this matter. I want finally to stress again the impact on the whole Teesside area if the Government's proposal is accepted. I understand the concern of my hon. Friends from Scotland about the 2,000 construction jobs which

might not go ahead. They hope for 2,000 jobs over three or four years, with a few hundred jobs remaining afterwards. I share their concern. But I invite the House to measure that concern against the loss of 10,000 jobs on Teesside. In my opinion, the answer is inescapable. It is to support the amendment for the deletion of the clause.

Dr. Jeremy Bray: The amendment has to be seen as my hon. Friends have seen it—in the light of the industries at stake and not just as an abstract question of fiscal principle. It has been presented as a matter of jobs in Scotland versus jobs on Teesside. Presented like that, there is no way in which my hon. Friends representing constituencies in Fife can abstain in any vote that threatens Moss Morran, and no way in which my hon. Friends representing Teesside constituencies can abstain on any vote that threatens Wilton.
I am no more disinterested or interested than any other hon. Member, but I have two specific interests or disinterests to declare. First, I represent a Scottish constituency and am anxious to see Scotland gain the greatest possible number of jobs from North Sea oil and gas. Secondly, I worked in ICI at Wilton for six years before I was first elected to Parliament for a Teesside constituency, and I worked not on some remote irrelevant problem, but on the planning and optimisation of production of ethelyne from plants which basically had the same configuration then as they have now. I left the employment of ICI immediately on my first election to the House and have never been employed by the company in any capacity since then.
To trace the background, and perhaps to see some way forward in the extremely difficult situation that we are facing, it is helpful to go back to 1976, when we first heard talk of Moss Morran and when ethylene demand in the United Kingdom was projected at about 2 million tonnes per annum. It was obvious that new capacity would use ethane, but Moss Morran was no threat to ICI operations on Teesside. However the bottom dropped out of the ethylene market, and of the petrochemical market generally early in 1980, partly as a result of the economic and industrial policies of "You know who".
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The demand for ethylene in the United Kingdom is now projected at about 1 million to 1·2 million tonnes per annum, of which Moss Morran will represent 50 per cent. It is 5 per cent. of the European market, but ethylene is a highly inflammable and explosive gas which is expensive to transport. There are pipelines connecting all the major United Kingdom producers and consumers, but there are no connections in Europe and none is envisaged.
The House may be aware that ICI was negotiating for ethane supplies from the gas-gathering pipeline until the cancellation of the pipeline, when the project was sabotaged by the Government. It was dependent thereafter on its competitors in the chemical industry, on BP, Esso and Shell, as effective sole suppliers of the reduced supply of ethane that is now available as a result of the cancellation of the gas-gathering pipeline. In this changed situation in the supply of ethane and in the changed market for petrochemicals—

Mr. Eggar: Will the hon. Gentleman confirm that ICI and BP were offered the ethane by Shell and Esso and that it is now being used at Moss Morran?

Dr. Bray: The hon. Gentleman will be aware also that ICI offered to Esso and Shell the sale of an ethylene plant at Wilton as easily the cheapest way of using the ethane. The issue of the sale of ethane to ICI is no longer an option, as it is not on offer. There is no market for it, because the vendors are unwilling to sell it.
That method of adapting the No. 5 cracker at Wilton to take ethane rather than naphtha feedstock would have been easily the cheapest way of absorbing the ethane capacity. However, it was not a solution that was acceptable to the oil companies. It is true that the ethane route for the production of ethylene is cheaper, but ICI has a complex which is dependent on products from feedstock which cannot be produced from ethane. It is, therefore, dependent on the continued use of at least some naphtha to provide the products needed for the aromatics, the benzenes and the xylenes for the production of nylon and polyesters as well as the production of the ethylene for the ethylene oxide, ethylene dichloride and vinyl chloride and on into the polyvinyl chloride market.
The complex cannot be sustained if the ethylene economy is undermined. It is not practicable to continue operating the nylon plants and the polyester plants—the monomers—if there is not an economic market for the ethylene which is necessarily co-produced with the raw material for the nylon and polyester. My hon. Friend the Member for Central Ayrshire (Mr. Lambie) is well aware of the tragedy of Ardeer and the loss of nylon production at that plant.

Mr. David Lambie: And Monsanto.

Dr. Bray: And Courtaulds at Aintree.
All that nylon capacity was vulnerable because it was not knit into the kind of complex that exists at Wilton, with the support not only of other chemical byproduct schemes but also on the energy side. The power station at Wilton produces a great amount of pass-out steam that is used in the nylon and other processes at the same time as it generates electricity. If one took away the demand for steam, the electricity for the electrolysis of chlorine would become uneconomic and the whole house of cards would fall to bits.
In that situation we are in serious danger of abandoning our position on synthetic fibre monomers and a great deal of petrochemical production generally. It would be for the convenience of ICI if Moss Morran disappeared, but that will not happen. My hon. Friends and myself in Scotland will ensure that it does not. Likewise, however, if Moss Morran is allowed to undermine our ethylene economy, ICI is not kidding when it says that the future of Wilton as a whole is seriously threatened. Once that investment of many billions of pounds is lost there is no chance of the plant being rebuilt in Scotland.
The dilemma that we are in is due to the random and irresponsible hands-off attitude of the Government and their total lack of an industrial policy. Such matters cannot be left to legalistic judgments by the Inland Revenue of tax laws framed in ignorance of a great many of the costs and other factors involved. These huge capital projects have to be looked at primarily in terms of their own cost structures, and then the tax and grant impact added to the basic economics to find the sensible solution.
When I was a Teesside Member, I said that it was cheaper to pension off chemical workers on full pay in the

south of France than to pay development area grants to keep them in jobs in the chemical industry. I received small thanks from my hon. Friends in the North-East for saying so. But it is the utmost folly to base job creation on huge capital-intensive plants which cost about £1 million or more per jpb created. It is an absurdly stupid way to build up employment in the development areas. That does not mean that we do not need the industries, but they are a wildly inefficient way to create jobs. However, where the plants already exist, just because there has been such a huge national investment, it is folly to dismantle and destroy them. That applies just as much to the steel as to the petrochemical industry.
The sensible course is to look at the operating costs and capacities of existing plants, the cost of different feedstocks, new plant and plant conversion to see what the best solution is without tax. The Treasury, the Inland Revenue and the Department of Industry have made no attempt to put together the information needed to reach a judgment. They believe that the problem can be resolved by gamesmanship and competition in a situation where competition cannot exist. We are talking of only one plant.
Having made proper examinations of the costs and benefits from the alternative solutions pre-tax, the Government should then add the tax and grant regime in such a way as not to distort the economic decisions, palatable or unpalatable, which then have to be adjusted for the necessary social considerations about which we all feel so strongly, but with full knowledge of the costs.
That is the basis on which we try to manage the North Sea oil tax regime. We try to create a tax structure that does not distort the basic economics of the situation. Surely it is rational to try to follow the same practice in the petrochemical industry. This miserable clause fails to do that.
Although ICI has a strong case, which the Government have failed to consider, and there are claims in Scotland that will have to be accommodated, it was wrong for ICI to go to the European Court to seek a resolution of the matter. We can sort out our industrial problems within this country. We have miserably failed to do so on this matter and the problems will not go away. They will still be with us in two years' time when the next general election is due. It is likely that the clause will be passed, Moss Morran will go forward and ICI will face difficulties over the viability of its petrochemical plants on Teesside. The next Government, not this miserable Government, will have to solve the problems.

Mr. William Rodgers: I agree with the hon. Member for Motherwell and Wishaw (Dr. Bray) that this is a miserable clause. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was reasonable to the point of ambivalence and I understand why that was. Hon. Members on both sides of the House have direct interests in the outcome of the debate. I have no such interest, but I am a Teesside Member and I agree with the hon. Member for Redcar (Mr. Tinn) that the right course is for the Government to withdraw the clause.
I should prefer the amendment not to be pushed to a Division, but if there is a vote I shall vote for the deletion of the clause. I hope that the Government will listen to the debate, dwell on the point made by the hon. Member for Motherwell and Wishaw at the end of his speech and


accept that there is still time to find an accommodation that will meet the needs of all parts of Britain and will result in no loss of employment.
The hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) was as reasonable as ever, while being honestly partisan. He referred to the need to strike a proper bargain. What is at stake is a fair decision which will help both ICI and the oil companies. I do not believe that it is impossible to achieve that, but it will not be possible if the Government do not accept the amendment.
The Government's position is incomprehensible. The hon. Member for Motherwell and Wishaw was wrong when he said that ICI had taken the matter to the European Court. It has taken the issue to the High Court, which is a most unusual procedure. We have all reflected on whether that was proper, given that the Bill is before the House, but it was clearly the court of last resort for ICI. I hope that the Government will tell us about the discussions that they have had with the company since the Bill was considered in Committee.
There is no doubt that the clause involves clear and damaging discrimination against one company. If it were a Bill, instead of a clause in the Finance Bill, it would be appropriate to look at it in terms of hybridity. It makes a distinction in terms of rights between one private company and others. If it were a Bill it would not be acceptable to the House or to our Clerks.
I take the point made by the hon. Member for Stirling, Falkirk and Grangemouth about the need for industry in both the public and private sectors to be able to know what the future holds when making investment decisions, but, given the controversy that has arisen, the clause could be withdrawn for further discussion and reintroduced in next year's Finance Bill or, if necessary, brought back in special circumstances before then.
We are not committed to an annual cycle to settle these matters. It would be deplorable if we were. Many of us have thought that the idea of an annual Budget and Finance Bill is a mistake. This matter, which is directly related to the future of industry in the whole of the United Kingdom, is surely one at which the Government could have another look and come back to the House.
If I refer to the clause as corrupt, I do so in the philosophical and not in the moral sense. It does not involve corruption on anyone's part, but it does involve a philosophical distinction of corruption in so far as it differentiates in favour of some private companies owned by their shareholders and against others. That is another reason why the Government should withdraw the clause and examine it again.
I wish to put forward a series of propositions by which the clause must be examined. If there has been a conscious decision by the Government in favour of selective support, that is intervention by the Government of a remarkable type, but if that decision has been made in favour of selective support for Moss Morran and against Teesside, it is right that it should be said and defended today. But if it is not a decision in favour of selective support and conscious intervention, it is a gross error. The Government must decide which it is.
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There is an alternative and, here again, I believe it is for the Government to say. First, and most plausibly, ICI is incompetent as a judge of its best interests. If the Government take that view, they should say that ICI has no case and that if the clause remains in the Bill it will not be damaging to ICI or to employment in the way that the hon. Member for Redcar has suggested. That is another argument that the Government can deploy, but they must choose if they wish to do so. But, if ICI is not incompetent as a judge of its best interests, it is for the Government to say that ICI has been deliberately misleading Members of Parliament and the House in arguing the consequences of the clause as it sees it. Those are the different reasons the Government can give for seeking to maintain the clause in the Bill.
In view of our debate tonight, the discussions in Committee and the breakdown of negotiations between the Government and this major British company, and in view of the action that ICI has taken in the High Court, the right course is for the clause to be withdrawn.
May I suggest a procedure? This is not a division between the two sides of the House or between sectional geographical, regional or constituency interests, although those considerations come into the matter. It is a matter of interpreting the clause and deciding where its burden will lie, to whose advantage it is and to whose disadvantage. This is a unique situation. I should like to suggest to the Government that they should withdraw the clause and submit the principle and their own proposition to the Select Committee on Industry and Trade. That is an unusual procedure but a wholly fair one. No one would be prejudiced by the delay and in the end, when a recommendation was made by the Select Committee, the House would be prepared to accept it.
The right course for the Government is to withdraw the clause. I should be sorry to vote against it but will do so in the absence of an alternative.

Mr. Douglas: I shall try to be brief in my remarks about the amendment. I am a trifle disappointed with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). I normally agree with the line that he takes on such issues, because he is competent on Treasury and tax matters. One of the suppositions and fears underlying the proposals to delete the clause is that somehow or other the Inland Revenue will be taken in by the machinations of Shell and Esso and, perhaps, BP. If there is a fear of a tax concession—I deal quite bluntly with my hon. Friend the Member for Redcar (Mr. Tinn) and others who have expressed that fear—and of an advantage in tax terms, that is a matter for the Public Accounts Committee to examine. It is for the Public Accounts Committee to go behind the tax deals to see if there is any loss of revenue. A searching examination would be involved. Unlike the right hon. Member for Stockton (Mr. Rodgers), I do not take the view that this is a tax concession to Shell, Esso and BP. It is to remove, I understand, an anomaly in the Oil Taxation Act 1975. If the companies did not have a long-term view of the pricing arrangements for ethane, it would have been difficult for them to undertake a capital investment of the Moss Morran type.
It would be delightful to share the happy, academic and statistical view of my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) under which we would start again on the industrial strategy. My hon. Friend


knows that Moss Morran and Braefoot Bay are under construction. It is not possible to go to the constituencies of my hon. Friends the Members for Fife, Central (Mr. Hamilton) and for Kirkaldy (Mr. Gourlay) and say "Look boys, we will start again." It cannot be done.

Dr. Bray: If my hon. Friend had listened more carefully, he would have heard me say that it is necessary to consider the existing stock of plant. That stock determines the present operating costs. No stock of plant will stand still either at Moss Morran or on Teesside. It is necessary to consider the logic of future developments. The position in two year's time will be different to that of today.

Mr. Douglas: It is necessary to examine existing stock. It is also necessary to take account of the gases coming from the North Sea. Everyone would be happy if Almighty God had provided them in different proportions. When ethane was known to be available, neither ICI nor BP expressed interest. An arm's length deal could have been done. When the gas-gathering system was mooted, ICI thought, perhaps correctly, that it would be able to do a deal with BNOC and British Gas. I do not recall the right hon. Member for Stockton saying at that time "We should have the gas gathering system." I do not recall the hon. Member for Cathness (Mr. Maclennan) arguing that the ethane should be sent to safeguard jobs in central Scotland and to create Moss Morran.

Mr. Robert Maclennan: The hon. Gentleman must recall vividly that my right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) spoke in just those terms for the Social Democrats.

Mr. Douglas: Where is the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), the former Energy Minister, tonight? I am sure that he would accept the argument of Shell and Esso. I know enough about the oil companies to know that one thing one does not do is trust them. [HON. MEMBERS: "Oh".] One does not trust the oil companies because one day they will all fight each other and we shall try to arbitrate between them. The next day the oil companies will come together and fight us. I know sufficient about that.
Therefore, we must face reality. It is an unfortunate reality from the point of view of my right hon. and hon. Friends from the North-East. If I were in their position, I would do exactly the same as they are doing. They are right to defend their corner. ICI is right to put the pressure on the Government.
The right hon. Member for Stockton proposes the coitus interruptus view of the Social Democratic Party. We will stop now, and Shell and Esso can have their investment and go on with their project when the review by the Select Committee on Industry and Trade has been carried out. We cannot carry on industrial policy in that way. No one sensible who has anything to do with industry would propose it.
What do we do with the ethane? Is it proposed that we put it back in the ground? Do we flare it? It is obvious that it will be used for industrial purposes. My major argument against ICI's case is as follows. I play the Scottish card. Is it suggested that as a result of the finds in the North Sea in Scotland we cannot have new petrochemical developments or protection of existing petrochemical

developments which will assist other petrochemical developments in the south through the ethylene pipeline and other developments? If that is what ICI is saying, Scottish Members will be entitled to rebel against ICI's case.
I do not accuse ICI of being incompetent. It has a great deal of difficulty in relation to the international petrochemical market. It has much difficulty in matching the opposition. Is it being suggested that the only opposition that it will face is a 500,000-ton cracker at Moss Morran? That is a ridiculous contention. My hon. Friend the Member for Motherwell and Wishaw understands the technical terms better than me.
If ICI is afraid that there is a concession in taxation remission terms, we should share that fear and go behind it as far as possible. I do not think that the Inland Revenue are fools. No one who has anything to do with them could take that point of view. Perhaps there is some mistake in the administered price. The House should investigate through the Public Accounts Committee.
I have the background of Scotland, particularly Fife, as do many of my right hon. and hon. Friends. If the amendment is pressed to a division, there is no way I can support the Opposition.

Mr. Ian Wrigglesworth: I have tried to follow the hon. Gentleman's argument. The jobs of 9,000 people on Teesside are threatened. Is the hon. Gentleman saying to those 9,000 workers that their jobs are not under threat of that, if jobs are under threat, their jobs are less important than those in Scotland?

Mr. Douglas: As a lifelong member of the AUEW, I am hardly likely to take that view. ICI's case should not be examined merely on the basis of its submission. Perhaps that is a matter for the Select Committee on Industry and Trade which could examine ICI's case. If it is believed that the companies with which it competes are getting an unfair tax advantage, the matter should be examined.
One must return to the reality of what one does with the ethylene. It cannot be given to ICI. It must be used in petrochemical development. It is perfectly fair that the price structure is made as transparent as possible.

12 midnight

Mr. Ted Leadbitter: No one is better able to convince Members of Parliament that they should fight each other on a regional basis than large companies. Whenever I hear threats of lost work or of "If we do not get this" and "If we do not get that", my ears prick up. It is not the House's duty to respond to threats that deviate from the facts of the argument. The House makes a judgment about legislation and whether it will seriously affect employment prospects. It is up to the Government to convince the House of their arguments. They have had several consultations with oil companies and ICI. The House does not yet know all the facts.
The oil companies rightly want to persuade the Government that tax concessions are important to them because of the £500 million of investment at Moss Morran. Anyone may try to achieve a tax reduction. Because it is not at the North Sea exploration production level, ICI is trying to persuade Members of Parliament that it is disadvantaged. It says that because it must buy naphtha for its production of petrochemicals at 33p per the


therefore faces a bill of £500 million. It argues that, because of that Bill, it will lose £500 million worth of investment and 9,000 jobs.
A couple of simple questions must be asked. [Interruption.] The House might be aware that if it does not listen I shall talk for an hour. I have the Floor and I am just the chappie to keep it. The House determines the use of its time. I should enjoy reflecting after my speech on how the time was wasted.
The outcome of the negotiations appears to have given Esso, Shell and BP what might nicely be called an in-house transfer price advantage in relation to the chemical subsidiaries. In dealing with its naphtha production, ICI must have an arm's-length contractual arrangement which places it at a competitive disadvantage in the same area of production. That seems quite wrong. The Government must assure themselves that they have not made an error in the clause in such a way as to promote a situation that is unacceptable to two or three major private industries.
It is not often that I agree with the right hon. Member for Stockton (Mr. Rodgers) these days, but on this issue I do, although I do not accept that withdrawal of the clause would solve the problem. I should prefer the Government to convince the House that the dangers that we see in the Bill—not the companies' threats about unemployment—do not exist. I hope that the Government can do that and give some assurance to my part of the country, which is suffering excessive unemployment. In my constituency, 35,000 men are out of work, 2,000 young people have no firm jobs and almost 1,000 young people have not even a first offer of a job. Moreover, unemployment on Teesside is forecast to rise by a further 14,000 in the next two years. We cannot afford a judgment by the House on the legislation before us that will add to the job losses already forecast.
I appeal to the Government to respond to the request that I and others have made. They know all the facts of the matter and all the arguments that have been deployed and they have been party to a large number of discussions. The matter was debated thoroughly in the Standing Committee and the Opposition at any rate have decided that there is no political gain to be derived from fighting one another on a regional basis. We must bend our minds to the consequences of the legislation itself. If the Government will give an explanation, a Division may be avoided. I am afraid that Scottish Members might be pressed into supporting the Government, but I have no choice. If I am not satisfied with the Government's explanation I shall vote against their proposals.

Mr. Crouch: I shall detain the House for only a couple of minutes. [Interruption.] I was here until 4.30 this morning and I wish to speak on this issue.
We are dealing with two major industries—the oil industry and its by products and the chemical industry. In considering the problem of clause 129 we must be concerned with whether we may be damaging one or other of those important industries. Having worked all my life in the chemical industry—at one time I was with ICI, but I no longer have any connection with it—and as chairman of the all-party group on the chemical industry and also the all-party group on chemical studies dealing with the oil industry and others, I am somewhat split in my views on this.
I believe that the Government should pause tonight in dealing with clause 129. As they rush into this with typical Treasury logic in the belief that it is right and correct, they may well damage a major industry. The chemical industry could suffer due to the overcapacity and overproduction that could result from what in simple terms is a subsidy to the North Sea oil producing companies producing a product that will then go into the chemical industry at a far cheaper price.
It is a late hour for us to discuss such complicated matters, but all discussions with Treasury Ministers are complex. With my limited knowledge of the two industries, I plead with the Government to think beyond the range of Treasury and Inland Revenue matters and to consider two of our major industries. Perhaps even at this late hour the Treasury can think again about clause 129, which might cause irreparable harm because of unprofitable over production.
My right hon. Friend the Secretary of State for Education and Science, formerly the Secretary of State for Industry, often used to ask me "Everything is all right with the chemical industry, is it not?" I used to say "Yes", but I have not said it recently. There are signs on the horizen of great danger for the chemical industry in Britain, Europe and the world. They are signs of overproduction. ICI already overproduces and no longer makes a profit in some of its major divisions. We cannot afford to see our industries get into such a state. Clause 129 could produce overcapacity in our major earning industry and could produce fundamental change and disadvantage for our industrial future if we are not careful.
I urge Treasury Ministers to think carefully about the clause. Is it not worth postponing it for one year? Such a postponement would give everyone time. The oil industry is involved with the chemical industry, which has not let Britain down. It employs many people, has great productivity, good industrial relations, good research and great investment and export achievements. Let us not do anything that might jeopardise it. We have an opportunity tonight to pause for at least one year before taking a step that might cause irreparable damage.

The Minister of State, Treasury (Mr. John Wakeham): I am grateful to the Opposition for enabling such an important debate to take place. I understand the anxiety that hon. Members have expressed about their constituents' jobs. The Government share that concern, but they must do the right thing. I doubt whether I shall satisfy everyone tonight, but I shall try my best. I shall also try to avoid the ex-family squabbles that have broken out, but I shall try to go coolly and slowly through the matter to make it as clear as possible.
Where oil or gas is not sold at arm's length—for example, in transfers between affiliates—it must be valued for tax purposes at the price that it would fetch in a comparable arm's length deal. That is a necessary and internationally recognised rule to prevent oil companies from reducing their tax bills by imposing artificially low prices. The principle is clear, well known and accepted. Without it, integrated companies could unfairly undercut their non-integrated competitors, so the detailed rules must be drawn up carefully so as to favour neither the independent nor the integrated company. Therefore, we must examine the way in which independent companies draw up arm's-length deals.
12.15 am
Crude oil and the heavier gases are sold on relatively short-term deals and, where the contracts last for a longer period, there are provisions for the price to be renegotiated at least as frequently as once a quarter. But lighter gases, such as ethane, would be sold at arm's length in long-term deals lasting up to 20 years with a price formula to operate during the life of the contract. I should tell the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) that many examples of long-term contracts for the lighter gases last longer than this contract.
Such a formula would usually comprise a base price and an escalator which changes the price regularly over the contract period in accordance with a published price indicator. Renegotiation of the formula would be possible, if at all, only years apart or in specially defined circumstances.
Under the existing tax rules, the valuation rules for ethane, unlike those for crude oil and the heavier gases are anomalous in that they provide for monthy valuations and simply do not reflect what is happening on the open market. They therefore expose inter-affiliate deals to great uncertainty and risk which cannot be justified.
The essence of the Government's case for the clause is that it does not represent a concession, but removes an anomaly. The hon. Member for Redcar (Mr. Tinn) was the first to make that point. To continue to tax ethane under the existing inter-affiliate system in schedule 3 to the 1975 Act would not be in accordance with what happens in the market place.

Mr. Tinn: In the absence of a market for ethane, how will the Inland Revenue determine whether the election formula is justified?

Mr. Wakeham: The matter is complex and I shall deal with it.
Clause 129 and schedule 16 remove the anomaly by allowing companies involved in non-arm's-length transactions to elect for valuations to be based upon a long-term price formula. The formula cannot be any selected by the oil company. It must be comparable in the base price and the escalator with what arm's-length parties would agree. It provides the certainty that is present in third-party deals.
It is not right to say that there is no market in ethane. There are certainly a number of long-term contracts in Europe and the Revenue has evidence of what buyers and sellers are prepared to pay. It is certain that there is no short-term market in ethane.
I was asked about Shell's proposals. I have not had the opportunity to discuss the proposals with Shell, but they seem to be similar to the proposals in the Bill. If ICI believes that further useful discussions could take place between Shell and ICI to see whether there is common ground, the Government would be happy to consider that.
Representations were made to the effect that confining the scope of the clause to commercially pure streams of ethane was too restrictive. We accepted that there was a good case in principle and in practice for the clause to be extended to mixed streams where, as with ethane, they would also be sold on long-term contracts in arm's-length deals.
ICI's petrochemical plants use naphtha which ICI has to buy on the open market. It is a feedstock that is more expensive than ethane and is therefore at a natural competitive disadvantage. The purpose of the clause is to give neither an additional advantage nor an additional

disadvantage to ethane compared with naphtha. There is no dispute between the Government and ICI about the fact that naphtha has a disadvantage; indeed, ICI recognised it during all our discussions. ICI's position is not that the clause will do harm to ICI; its view, as I understand it. is that the clause might do harm to ICI. ICI does not know, nor do I know, what valuation will be agreed between the Inland Revenue and oil companies.
When we debated the Bill in Committee, I explained that we had tried to reassure ICI that the clause does not involve any element of subsidy to its competitors, but in view of the concern expressed by several hon. Members at the time, I undertook without commitment to hold further discussions with ICI before Report in an endeavour to allay its fears. Since the Committee stage, my right hon. and learned Friend the Chancellor of the Exchequer and I and officials have met ICI repeatedly, and every effort has been made to clarify points of doubt and to give all reasonable assurances on the principle and operation of the clause.
My view is that ICI appreciates that there is an anomaly in the existing rules but is concerned about the proposed remedy in clause 129 because it fears that it might lead to too low a valuation. But the proposals do no more than model the tax valuation on the price formula which independent parties, dealing at arm's length, would agree. If the proposition is that the Inland Revenue would agree a valuation, it is one that I will not accept. The Inland Revenue has statutory duties imposed upon it pertaining to the care and maintenance of the tax system, and to agree a valuation that did not take into account all the proper factors would be tantamount to a wilful neglect of those responsibilities.

Mr. Wrigglesworth: Will the Minister accept that the feedstock that ICI would be obtaining would cost about 33p, as against 16p for the other feedstock in Scotland?

Mr. Wakeham: I certainly do not accept that. I understand that ICI has quoted the figures. Therefore, the figure of its own price that it pays for naphtha is presumably right. The figure for ethane is agreed between the Inland Revenue and the oil companies concerned, and I have no knowledge of it. It would be quite wrong for me to know. I do not know and no Minister knows the price. What we know is the formula. The tax affairs of any taxpayer in Britain are confidential and are not discussed between Treasury Ministers and the Inland Revenue.

Dr. Bray: Will the Minister agree that there is a considerable possibility that the companies involved in the case would agree to full cost disclosure to enable a sensible solution to be reached?

Mr. Wakeham: If companies wish to reveal information they may. It is not possible for the Inland Revenue or the Government to breach the long-accepted rules of confidentiality. If companies are prepared to reveal information as a result of the discussions that is up to them. The Government would not require them to give details of confidential information.
One of ICI's specific fears was that the evaluations under the clause would ignore what ethane would fetch for fuel use. That is another point that the hon. Member for Redcar made. That never was intended, but due to ICI's worries we introduced an amendment in Committee which would put beyond doubt the fact that the valuation would


reflect the highest price an arm's-length seller would receive for the ethane for fuel or petrochemicals. Unfortunately, ICI felt that that did not go far enough.

Mr. Tinn: The hon. Gentleman continues to refer to the price that would be paid in arm's-length dealing. The need for the machinery arises because there are no arm's-length deals in this commodity. How will the Inland Revenue determine what is a fair market price when it has nothing to go by?

Mr. Wakeham: There are some long-term contracts for ethane in Europe. The Inland Revenue has plenty of information about those, and I do not believe that it will be as difficult as the hon. Gentleman thinks to arrive at a fair price.
ICI argued that ethane should be valued at the equivalent of heavy fuel oil, which the company suggests is about 26p a therm. It wanted that included in the legislation as a floor to the valuation. I am advised that there is no simple market price for ethane that could be properly written into the legislation. The price can vary considerably with the volume of gas, its position, and the specification and timing of any agreement. It is those considerations that the Inland Revenue must bear in mind when it looks at contracts on which it is asked to form an opinion. If the Inland Revenue is not satisfied that such contracts are fair and proper it has a statutory duty to reflect that opinion.
During the discussions with ICI it was suggested—this was a point made by the right hon. Member for Stockton (Mr. Rodgers)—that the legislation might be deferred until next year because valuations do not have to be made for a few years. Arm's-length purchasers would agree contracts with long-term price formulae for their ethane supplies before committing themselves to the substantial capital expenditure involved. In an attempt to agree in non-arm's-length negotiations what would happen in an arm's-length agreement it would be essential for the oil companies to agree the price and arrangements for their long-term supplies before they could involve themselves in substantial capital expenditure.
The possible application of the clause to actual valuation of certain mixed streams could arise fairly soon. Deferment would prejudice the companies compared with those involved in third-party negotiations and put important investments at risk. Against that, it has been argued that we are putting investment and many jobs at risk at Wilton. We have investigated the matter thoroughly. Naphtha-based crackers such as those at Wilton face a challenge with ethane becoming available, not just from the North Sea but also the Middle East, when the market is already depressed.
Ethane cannot take over completely from naphtha. It does not produce a wide range of products. There will still be a future for efficient naphtha crackers. Whether or not that will be so—it would be a rash man who forecast the long-term future of any industrial plant in a rapidly changing world—clause 129 does not put its future at risk. It removes a tax anomaly against inter-affiliate deals. It would be wrong to keep such an anomaly to protect naphtha-based crackers. The end result could be a weaker and not stronger United Kingdom petrochemical industry.
12.30 am
ICI is seeking in the courts a declaration that the clause is contrary to article 92 of the Treaty of Rome as constituting a State aid to industry that distorts competition. It is now a matter for the courts to decide and it would be wrong for me to prejudice the outcome of the case. But the Government's advice is that the clause is not a State aid as it does no more than put inter-affiliate deals on all fours with arm's-length deals for tax purposes. In doing so, it follows the internationally accepted principle of arm's-length valuation.
I am sorry that ICI has felt it necessary to take that step, with its potential repercussions on areas outside the tax treatment of its case. But it should not dissuade hon. Members from agreeing to the clause, which, as I said in Committee, despite the controversy that it has aroused, is no more than a measure to remove a tax anomaly arising under existing legislation that might otherwise inhibit worthwhile investment.
Failure to pass the clause could put in question the future development of Moss Morran and Grangemouth and the jobs in those places. To discriminate against certain tax-paying companies because of a call by one company that faces a difficult problem would be to act in a way not in accordance with the generally accepted principles of taxation. It would not be right to solve a difficult problem by treating unfairly and unjustifiably another company's tax affairs. The implicit criticism is that the Inland Revenue would not be able to carry out its statutory duties responsibly and efficiently, but I do not believe that.
The Government understand the problem that ICI faces because of the natural advantages of ethane over naphtha as a feedstock. We are not prepared to wash our hands of the problems on Teesside. We are prepared to continue to talk to ICI to see whether we can find a way in which it is right and proper for the Government to assist in dealing with the difficulties. But it cannot be by unfairly treating a tax-paying company that submits that the present valuations for ethane are inappropriate.

Mr. Robert Sheldon: The Minister rightly points to the seriousness of ICI's case and the potential repercussions.
It is wrong that matters have been allowed to come to the pass where important large companies that have enormous consequences for employment, development and other industrial prospects are placed in a difficult position because the Government came late to a discussion and understanding of the important issues.
The promise to extend the consultations that were to take place between the Committee and Report stages of the Finance Bill has not produced the solution that was hoped for. It may be that there has been insufficient time for the discussions that we expected. It is not the legislation that is important. The legislation will not take effect for a year or two, or even longer. There is no ethane being used under the legislation. The industry rightly wants to be able to plan on the basis of an agreement. It is up to the Minister to obtain such an agreement, so that the assurances can be given.
The Minister said that he was prepared to enter into discussions on the basis of the Shell memorandum, the purpose of which is to ensure that the forward estimate of the value of the ethane being transferred to the


petrochemical plant will equate with the pricing formula that one would expect to see between two independent companies.
That is similar to the arguments being put forward by ICI and should form the basis of a number of useful discussions. I look forward to seeing such discussions continue. We should come to a resolution. The clause should not proceed, so that discussions of the kind that have been mentioned can take place. We shall continue to press for a solution that is satisfactory to such important companies. We shall expect the Minister to come to the House at some stage with such a solution. Meanwhile, we cannot allow the clause to proceed. These matters should be decided in the interests of the companies concerned. Assurances can and should be given on the basis of which companies can develop and advance.

Question put, That the amendment be made:—

The House divided: Ayes 174, Noes 299.

Division No. 271]
[10.26 pm


AYES


Abse, Leo
Evans, Ioan (Aberdare)


Adams, Allen
Ewing, Harry


Allaun, Frank
Faulds, Andrew


Anderson, Donald
Field, Frank


Archer, Rt Hon Peter
Flannery, Martin


Ashley, Rt Hon Jack
Fletcher, Ted (Darlington)


Ashton, Joe
Ford, Ben


Atkinson, N. (H'gey,)
Forrester, John


Bagier, Gordon A.T.
Foster, Derek


Barnett, Guy (Greenwich)
Foulkes, George


Barnett, Rt Hon Joel (H'wd)
Fraser, J. (Lamb'th, N'W'd)


Benn, Rt Hon Tony
Freeson, Rt Hon Reginald


Bennett, Andrew (St'kp't N)
Garrett, John (Norwich S)


Bidwell, Sydney
Garrett, W. E. (Wallsend)


Booth, Rt Hon Albert
Golding, John


Boothroyd, Miss Betty
Gourlay, Harry


Bray, Dr Jeremy
Graham, Ted


Brown, Hugh D. (Provan)
Hamilton, James (Bothwell)


Brown, Ron (E'burgh, Leith)
Hamilton, W. W. (C'tral Fife)


Buchan, Norman
Hardy, Peter


Callaghan, Rt Hon J.
Harrison, Rt Hon Walter


Callaghan, Jim (Midd't'n &amp; P)
Hart, Rt Hon Dame Judith


Campbell, Ian
Hattersley, Rt Hon Roy


Campbell-Savours, Dale
Haynes, Frank


Canavan, Dennis
Heffer, Eric S.


Cant, R. B.
Hogg, N. (E Dunb't'nshire)


Carmichael, Neil
Holland, S. (L'b'th, Vauxh'll)


Carter-Jones, Lewis
Home Robertson, John


Clark, Dr David (S Shields)
Homewood, William


Clarke, Thomas C'b'dge, A'rie
Hooley, Frank


Cocks, Rt Hon M. (B'stol S)
Howell, Rt Hon D.


Cohen, Stanley
Hoyle, Douglas


Coleman, Donald
Huckfield, Les


Concannon, Rt Hon J. D.
Hughes, Mark (Durham)


Cook, Robin F.
Hughes, Robert (Aberdeen N)


Cowans, Harry
Hughes, Roy (Newport)


Cox, T. (W'dsw'th, Toot'g)
Janner, Hon Greville


Craigen, J. M. (G'gow, M'hill)
Jay, Rt Hon Douglas


Crowther, Stan
John, Brynmor


Cryer, Bob
Johnson, James (Hull West)


Cunningham, Dr J. (W'h'n)
Jones, Rt Hon Alec (Rh'dda)


Dalyell, Tam
Jones, Barry (East Flint)


Davidson, Arthur
Kaufman, Rt Hon Gerald


Davies, Rt Hon Denzil (L'lli)
Kerr, Russell


Davis, Clinton (Hackney C)
Kilroy-Silk, Robert


Davis, Terry (B'ham, Stechf'd)
Kinnock, Neil


Deakins, Eric
Lambie, David


Dean, Joseph (Leeds West)
Lamond, James


Dewar, Donald
Leadbitter, Ted


Dixon, Donald
Lestor, Miss Joan


Dobson, Frank
Lewis, Ron (Carlisle)


Dormand, Jack
Litherland, Robert


Douglas, Dick
Lofthouse, Geoffrey


Dubs, Alfred
McCartney, Hugh


Duffy, A. E. P.
McDonald, Dr Oonagh


Dunlop, John
McElhone, Frank


Dunnett, Jack
McGuire, Michael (Ince)


Dunwoody, Hon Mrs G.
McKay, Allen (Penistone)


Eadie, Alex
McKelvey, William


Eastham, Ken
MacKenzie, Rt Hon Gregor


Edwards, R. (W'hampt'n S E)
McNamara, Kevin


Ellis, R. (NE D'bysh're)
McTaggart, Robert


English, Michael
McWilliam, John


Ennals, Rt Hon David
Marks, Kenneth






Marshall, Dr Edmund (Goole)
Shore, Rt Hon Peter


Marshall, Jim (Leicester S)
Short, Mrs Renée


Marshall, Michael (Arundel)
Silkin, Rt Hon J. (Deptford)


Martin, M (G'gow S'burn)
Silverman, Julius


Mason, Rt Hon Roy
Skinner, Dennis


Maxton, John
Smith, Rt Hon J. (N Lanark)


Maynard, Miss Joan
Soley, Clive


Meacher, Michael
Spearing, Nigel


Mikardo, Ian
Spriggs, Leslie


Millan, Rt Hon Bruce
Stallard, A. W.


Miller, Dr M. S. (E Kilbride)
Stoddart, David


Mitchell, Austin (Grimsby)
Stott, Roger


Morris, Rt Hon A. (W'shawe)
Strang, Gavin


Morris, Rt Hon C. (O'shaw)
Straw, Jack


Morton, George
Summerskill, Hon Dr Shirley


Moyle, Rt Hon Roland
Taylor, Mrs Ann (Bolton W)


Newens, Stanley
Thomas, Dr R. (Carmarthen)


Oakes, Rt Hon Gordon
Thorne, Stan (Preston South)


O'Neill, Martin
Tilley, John


Palmer, Arthur
Tinn, James


Park, George
Torney, Tom


Parker, John
Urwin, Rt Hon Tom


Parry, Robert
Varley, Rt Hon Eric G.


Pavitt, Laurie
Wainwright, E. (Dearne V)


Pendry, Tom
Walker, Rt Hon H. (D'caster)


Powell, Raymond (Ogmore)
Weetch, Ken


Prescott, John
Welsh, Michael


Price, C. (Lewisham W)
White, Frank R.


Race, Reg
White, J. (G'gow Pollok)


Radice, Giles
Whitehead, Phillip


Rees, Rt Hon M (Leeds S)
Whitlock, William


Richardson, Jo
Williams, Rt Hon A. (S'sea W)


Roberts, Albert (Normanton)
Wilson, Gordon (Dundee E)


Roberts, Allan (Bootle)
Wilson, Rt Hon Sir H. (H'ton)


Roberts, Ernest (Hackney N)
Wilson, William (C'try SE)


Roberts, Gwilym (Cannock)
Winnick, David


Robertson, George
Woodall, Alec


Robinson, G. (Coventry NW)
Woolmer, Kenneth


Rooker, J. W.
Wright, Sheila


Ross, Ernest (Dundee West)
Young, David (Bolton E)


Rowlands, Ted



Sever, John
Tellers for the Ayes:


Sheerman, Barry
Mr. Lawrence Cunliffe and


Sheldon, Rt Hon R.
Mr. Ron Leighton


NOES


Adley, Robert
Brinton, Tim


Aitken, Jonathan
Brittan, Rt. Hon. Leon


Alexander, Richard
Brotherton, Michael


Alison, Rt Hon Michael
Brown, Michael (Brigg &amp; Sc'n)


Alton, David
Brown, Ronald W. (H'ckn'y S)


Ancram, Michael
Browne, John (Winchester)


Arnold, Tom
Bruce-Gardyne, John


Aspinwall, Jack
Bryan, Sir Paul


Atkins, Rt Hon H. (S'thorne)
Buchanan-Smith, Rt. Hon. A.


Atkins, Robert (Preston N)
Buck, Antony


Atkinson, David (B'm'th,E)
Budgen, Nick


Baker, Nicholas (N Dorset)
Bulmer, Esmond


Banks, Robert
Burden, Sir Frederick


Beaumont-Dark, Anthony
Butcher, John


Beith, A. J.
Butler, Hon Adam


Bendall, Vivian
Cadbury, Jocelyn


Bennett, Sir Frederic (T'bay)
Carlisle, John (Luton West)


Benyon, Thomas (A'don)
Carlisle, Kenneth (Lincoln)


Benyon, W. (Buckingham)
Carlisle, Rt Hon M. (R'c'n)


Berry, Hon Anthony
Chalker, Mrs. Lynda


Best, Keith
Channon, Rt. Hon. Paul


Bevan, David Gilroy
Chapman, Sydney


Biffen, Rt Hon John
Churchill, W. S.


Biggs-Davison, Sir John
Clark, Hon A. (Plym'th, S'n)


Blackburn, John
Clark, Sir W. (Croydon S)


Blaker, Peter
Clarke, Kenneth (Rushcliffe)


Body, Richard
Clegg, Sir Walter


Bonsor, Sir Nicholas
Cockeram, Eric


Boscawen, Hon Robert
Colvin, Michael


Bottomley, Peter (W'wich W)
Cope, John


Bowden, Andrew
Cormack, Patrick


Boyson, Dr Rhodes
Corrie, John


Braine, Sir Bernard
Costain, Sir Albert


Bright, Graham
Cranborne, Viscount





Crawshaw, Richard
Knight, Mrs Jill


Critchley, Julian
Knox, David


Crouch, David
Lamont, Norman


Dorrell, Stephen
Lang, Ian


Douglas-Hamilton, Lord J.
Latham, Michael


Dover, Denshore
Lee, John


du Cann, Rt Hon Edward
Lennox-Boyd, Hon Mark


Dunn, Robert (Dartford)
Lester, Jim (Beeston)


Durant, Tony
Lewis, Kenneth (Rutland)


Eden, Rt Hon Sir John
Lloyd, Ian (Havant &amp; W'loo)


Edwards, Rt Hon N. (P'broke)
Lloyd, Peter (Fareham)


Eggar, Tim
Loveridge, John


Elliott, Sir William
Luce, Richard


Eyre, Reginald
Lyell, Nicholas


Fairbairn, Nicholas
Lyons, Edward (Bradf'd W)


Fairgrieve, Sir Russell
Macfarlane, Neil


Faith, Mrs Sheila
MacGregor, John


Farr, John
MacKay, John (Argyll)


Fell, Sir Anthony
Macmillan, Rt Hon M.


Fenner, Mrs Peggy
McNair-Wilson, M. (N'bury)


Finsberg, Geoffrey
McNair-Wilson, P. (New F'st)


Fisher, Sir Nigel
McNally, Thomas


Fletcher, A. (Ed'nb'gh N)
Madel, David


Fletcher-Cooke, Sir Charles
Major, John


Fookes, Miss Janet
Marland, Paul


Forman, Nigel
Marten, Rt Hon Neil


Fowler, Rt Hon Norman
Mather, Carol


Fox, Marcus
Maude, Rt Hon Sir Angus


Fraser, Peter (South Angus)
Mawby, Ray


Fry, Peter
Mawhinney, Dr Brian


Gardner, Edward (S Fylde)
Maxwell-Hyslop, Robin


Garel-Jones, Tristan
Mayhew, Patrick


Glyn, Dr Alan
Mellor, David


Goodhew, Sir Victor
Meyer, Sir Anthony


Goodlad, Alastair
Miller, Hal (B'grove)


Gorst, John
Mills, Iain (Meriden)


Gow, Ian
Mills, Sir Peter (West Devon)


Grant, Anthony (Harrow C)
Miscampbell, Norman


Gray, Hamish
Mitchell, David (Basingstoke)


Greenway, Harry
Moate, Roger


Griffiths, E. (B'y St. Edm'ds)
Monro, Sir Hector


Griffiths, Peter Portsm'th N)
Montgomery, Fergus


Grylls, Michael
Moore, John


Gummer, John Selwyn
Morris, M. (N'hampton S)


Hamilton, Michael (Salisbury)
Morrison, Hon C. (Devizes)


Hampson, Dr Keith
Morrison, Hon P. (Chester)


Hannam,John
Mudd, David


Haselhurst, Alan
Murphy, Christopher


Havers, Rt Hon Sir Michael
Myles, David


Hawkins, Sir Paul
Neale, Gerrard


Hawksley, Warren
Needham, Richard


Hayhoe, Barney
Nelson, Anthony


Heddle, John
Neubert, Michael


Henderson, Barry
Newton, Tony


Heseltine, Rt Hon Michael
Normanton, Tom


Hicks, Robert
Ogden, Eric


Higgins, Rt Hon Terence L.
Onslow, Cranley


Hill, James
Oppenheim, Rt Hon Mrs S.


Hogg, Hon Douglas (Gr'th'm)
Osborn, John


Holland, Philip (Carlton)
Page, John (Harrow, West)


Hooson, Tom
Page, Richard (SW Herts)


Horam, John
Parkinson, Rt Hon Cecil


Hordern, Peter
Parris, Matthew


Howell, Rt Hon D. (G'ldf'd)
Patten, John (Oxford)


Howell, Ralph (N Norfolk)
Pattie, Geoffrey


Howells, Geraint
Pawsey, James


Hunt, David (Wirral)
Penhaligon, David


Hunt, John (Ravensbourne)
Percival, Sir Ian


Irvine, Bryant Godman
Peyton, Rt Hon John


Irving, Charles (Cheltenham)
Pink, R. Bonner


Jenkin, Rt Hon Patrick
Pollock, Alexander


Jessel, Toby
Porter, Barry


Johnson Smith, Sir Geoffrey
Prentice, Rt Hon Reg


Jopling, Rt Hon Michael
Price, Sir David (Eastleigh)


Joseph, Rt Hon Sir Keith
Prior, Rt Hon James


Kaberry, Sir Donald
Proctor, K. Harvey


Kellett-Bowman, Mrs Elaine
Raison, Rt Hon Timothy


Kershaw, Sir Anthony
Rees-Davies, W. R.


Kimball, Sir Marcus
Renton, Tim


King, Rt Hon Tom
Rhodes James, Robert






Rhys Williams, Sir Brandon
Skeet, T. H. H.


Ridley, Hon Nicholas
Smith, Cyril (Rochdale)


Rifkind, Malcolm
Smith, Dudley


Rippon, Rt Hon Geoffrey
Smith, Tim (Beaconsfield)


Roberts, M. (Cardiff NW)
Speed, Keith


Roberts, Wyn (Conway)
Speller, Tony


Rodgers, Rt Hon William
Spence, John


Roper, John
Spicer, Jim (West Dorset)


Ross, Stephen (Isle of Wight)
Spicer, Michael (S Worcs)


Rossi, Hugh
Sproat, Iain


Rost, Peter
Squire, Robin


Rumbold, Mrs A. C. R.
Stainton, Keith


Sainsbury, Hon Timothy
Stanley, John


St. John-Stevas, Rt Hon N.
Steel, Rt Hon David


Scott, Nicholas
Steen, Anthony


Shaw, Giles (Pudsey)
Stevens, Martin


Shelton, William (Streatham)
Stewart, A. (E Renfrewshire)


Shepherd, Colin (Hereford)
Stewart, Ian (Hitchin)


Shepherd, Richard
Stokes, John


Shersby, Michael
Stradling Thomas, J.


Silvester, Fred
Tapsell, Peter


Sims, Roger
Taylor, Teddy (S'end E)




Tebbit, Rt Hon Norman
Ward, John


Temple-Morris, Peter
Warren, Kenneth


Thomas, Rt Hon Peter
Watson, John


Thompson, Donald
Wells, Bowen


Thorne, Neil {Ilford South)
Wheeler, John


Thornton, Malcolm
Whitelaw, Rt Hon William


Townend, John (Bridlington)
Whitney, Raymond


Townsend, Cyril D, (B'heath)
Wickenden, Keith


Trippier, David
Wiggin, Jerry


Trotter, Neville
Wilkinson, John


van Straubenzee, Sir W.
Williams, D.(Montgomery)


Vaughan, Dr Gerard
Williams, Rt Hon Mrs (Crosby)


Viggers, Peter
Winterton, Nicholas


Waddington, David
Wolfson, Mark


Wakeham, John
Young, Sir George (Acton)


Waldegrave, Hon William
Younger, Rt Hon George


Walker, Rt Hon P. (W'cester)



Walker, B. (Perth)
Tellers for the Noes:


Waller, Gary
Mr. Peter Brooke and


Walters, Dennis
Mr. Archie Hamilton.

Division No. 272]
[12.37 am


AYES


Abse, Leo
Forrester, John


Allaun, Frank
Foster, Derek


Alton, David
Fraser, J. (Lamb'th, N'w'd)


Anderson, Donald
Freeson, Rt Hon Reginald


Archer, Rt Hon Peter
Garrett, John (Norwich S)


Ashley, Rt Hon Jack
Garrett, W. E. (Wallsend)


Ashton, Joe
Graham, Ted


Atkinson, N.(H'gey,)
Hamilton, James (Bothwell)


Bagier, Gordon A.T.
Hardy, Peter


Barnett, Guy (Greenwich)
Harrison, Rt Hon Walter


Barnett, Rt Hon Joel (H'wd)
Hattersley, Rt Hon Roy


Beith, A. J.
Haynes, Frank


Benn, Rt Hon Tony
Heffer, Eric S.


Booth, Rt Hon Albert
Holland, S. (L'b'th, Vauxh'll)


Boothroyd, Miss Betty
Homewood, William


Bray, Dr Jeremy
Hooley, Frank


Brown, Ronald W. (H'ckn'y S)
Howell, Rt Hon D.


Callaghan, Rt Hon J.
Hoyle, Douglas


Callaghan, Jim (Midd't'n &amp; P)
Huckfield, Les


Cant, R. B.
Hughes, Mark (Durham)


Carter-Jones, Lewis
Hughes, Robert (Aberdeen N)


Clark, Dr David (S Shields)
Hughes, Roy (Newport)


Cocks, RtHon M. (B'stol S)
Janner, Hon Greville


Cohen, Stanley
Jay, Rt Hon Douglas


Coleman, Donald
John, Brynmor


Concannon, Rt Hon J. D.
Jones, Rt Hon Alec (Rh'dda)


Cowans, Harry
Jones, Barry (East Flint)


Cox, T. (W'dsw'th, Toot'g)
Kaufman, Rt Hon Gerald


Crawshaw, Richard
Kerr, Russell


Crowther, Stan
Kilroy-Silk, Robert


Cryer, Bob
Kinnock, Neil


Cunliffe, Lawrence
Lamond, James


Cunningham, Dr J. (W'h'n)
Leadbitter, Ted


Davidson, Arthur
Leighton, Ronald


Davies, Rt Hon Denzil (L'lli)
Lewis, Ron (Carlisle)


Davis, Clinton (Hackney C)
Litherland, Robert


Davis, Terry (B'ham, Stechf'd)
Lofthouse, Geoffrey


Deakins, Eric
Lyons, Edward (Bradf'd W)


Dean, Joseph (Leeds West)
McCartney, Hugh


Dixon, Donald
McDonald, Dr Oonagh


Dobson, Frank
McElhone, Frank


Dormand, Jack
McGuire, Michael (Ince)


Dubs, Alfred
Maclennan, Robert


Duffy, A. E. P.
McNamara, Kevin


Dunnett, Jack
McWilliam, John


Dunwoody, Hon Mrs G.
Marks, Kenneth


Eastham, Ken
Marshall, Dr Edmund (Goole)


Ellis, R. (NE D'bysh're)
Marshall, Jim (Leicester S)


Ennals, Rt Hon David
Martin, M(G'gow S'burn)


Evans, loan (Aberdare)
Maynard, Miss Joan


Evans, John (Newton)
Meacher, Michael


Faulds, Andrew
Mitchell, Austin (Grimsby)


Field, Frank
Morris, Rt Hon A. (W'shawe)


Flannery, Martin
Morris, Rt Hon C. (O'shaw)


Fletcher, Ted (Darlington)
Moyle, Rt Hon Roland


Ford, Ben
Newens, Stanley





Oakes, Rt Hon Gordon
Stallard, A. W.


Palmer, Arthur
Steel, Rt Hon David


Park, George
Stoddart, David


Parry, Robert
Stott, Roger


Pavitt, Laurie
Strang, Gavin


Pendry, Tom
Straw, Jack


Powell, Raymond (Ogmore)
Summerskill, Hon Dr Shirley


Prescott, John
Thomas, Dr R.(Carmarthen)


Race, Reg
Thorne, Stan (Preston South)


Radice, Giles
Tilley, John


Rees, Rt Hon M (Leeds S)
Tinn, James


Richardson, Jo
Torney, Tom


Roberts, Allan (Bootle)
Urwin, Rt Hon Tom


Roberts, Ernest (Hackney N)
Varley, Rt Hon Eric G.


Roberts, Gwilym (Cannock)
Wainwright, E. (Dearne V)


Robinson, G. (Coventry NW)
Walker, Rt Hon H. (D'caster)


Rodgers, Rt Hon William
Welsh, Michael


Rooker, J. W.
White, Frank R.


Roper, John
Whitlock, William


Ross, Stephen (Isle of Wight)
Williams, Rt Hon A. (S'sea W)


Rowlands, Ted
Williams, Rt Hon Mrs (Crosby)


Sever, John
Wilson, Rt Hon Sir H. (H'ton)


Sheldon, Rt Hon R.
Wilson, William (C'try SE)


Shore, Rt Hon Peter
Winnick, David


Short, Mrs Renée
Woodall, Alec


Silkin, Rt Hon J. (Deptford)
Woolmer, Kenneth


Silverman, Julius
Wrigglesworth, Ian


Skinner, Dennis
Wright, Sheila


Smith, Cyril (Rochdale)
Young, David (Bolton E)


Smith, Rt Hon J. (N Lanark)



Soley, Clive
Tellers for the Ayes:


Spearing, Nigel
Mr. George Morton and


Spriggs, Leslie
Mr. Allen McKay.


NOES


Adams, Allen
Butcher, John


Aitken, Jonathan
Butler, Hon Adam


Alexander, Richard
Cadbury, Jocelyn


Alison, Rt Hon Michael
Campbell, Ian


Ancram, Michael
Canavan, Dennis


Arnold, Tom
Carlisle, John (Luton West)


Aspinwall, Jack
Carlisle, Kenneth (Lincoln)


Atkins, Robert (Preston N)
Carlisle, Rt Hon M. (R'c'n)


Atkinson, David (B'm'th,E)
Chalker, Mrs. Lynda


Baker, Nicholas (N Dorset)
Channon, Rt. Hon. Paul


Banks, Robert
Chapman, Sydney


Beaumont-Dark, Anthony
Churchill, W. S.


Bendall, Vivian
Clark, Hon A. (Plym'th, S'n)


Bennett, Sir Frederic (T'bay)
Clark, Sir W. (Croydon S)


Benyon, Thomas (A'c'on)
Clarke, Kenneth (Rushcliffe)


Benyon, W. (Buckingham)
Clarke, Thomas C'b'dge, A'rie


Berry, Hon Anthony
Colvin, Michael


Best, Keith
Cope, John


Bevan, David Gilroy
Corrie, John


Biffen, Rt Hon John
Costain, Sir Albert


Biggs-Davison, Sir John
Craigen, J. M. (G'gow, M'hill)


Blackburn, John
Cranborne, Viscount


Blaker, Peter
Critchley, Julian


Body, Richard
Crouch, David


Bonsor, Sir Nicholas
Dewar, Donald


Boscawen, Hon Robert
Dorrell, Stephen


Bottomley, Peter (W'wich W)
Douglas, Dick


Bowden, Andrew
Douglas-Hamilton, Lord J.


Boyson, Dr Rhodes
Dover, Denshore


Braine, Sir Bernard
du Cann, Rt Hon Edward


Bright, Graham
Dunn, Robert (Dartford)


Brinton, Tim
Durant, Tony


Brittan, Rt. Hon. Leon
Eadie, Alex


Brooke, Hon Peter
Eden, Rt Hon Sir John


Brotherton, Michael
Edwards, Rt Hon N. (P'broke)


Brown, Hugh D. (Provan)
Eggar, Tim


Brown, Michael(Brigg &amp; Sc'n)
Ewing, Harry


Browne, John (Winchester)
Eyre, Reginald


Bruce-Gardyne, John
Fairbairn, Nicholas


Bryan, Sir Paul
Fairgrieve, Sir Russell


Buchanan-Smith, Rt. Hon. A.
Faith, Mrs Sheila


Buck, Antony
Furr, John


Budgen, Nick
Fell, Sir Anthony


Bulmer, Esmond
Fenner, Mrs Peggy


Burden, Sir Frederick
Finsberg, Geoffrey






Fisher, Sir Nigel
Marland, Paul


Fletcher, A. (Ed'nb'gh N)
Marten, Rt Hon Neil


Fletcher-Cooke, Sir Charles
Mather, Carol


Fookes, Miss Janet
Maude, Rt Hon Sir Angus


Forman, Nigel
Mawby, Ray


Foulkes, George
Mawhinney, Dr Brian


Fowler, Rt Hon Norman
Maxton, John


Fox, Marcus
Maxwell-Hyslop, Robin


Fraser, Peter (South Angus)
Mayhew, Patrick


Gardner, Edward (S Fylde)
Mellor, David


Garel-Jones, Tristan
Meyer, Sir Anthony


Glyn, Dr Alan
Miller, Hal (B'grove)


Goodhart, Sir Philip
Mills, Iain (Meriden)


Goodhew, Sir Victor
Mills, Sir Peter (West Devon)


Goodlad, Alastair
Miscampbell, Norman


Gorst, John
Mitchell, David (Basingstoke)


Gow, Ian
Moate, Roger


Grant, Anthony (Harrow C)
Monro, Sir Hector


Gray, Hamish
Montgomery, Fergus


Greenway, Harry
Moore, John


Griffiths, E. (B'ySt. Edm'ds)
Morris, M. (N'hampton S)


Griffiths, Peter Portsm'th N)
Morrison, Hon C. (Devizes)


Grylls, Michael
Morrison, Hon P. (Chester)


Gummer, John Selwyn
Mudd, David


Hamilton, Michael (Salisbury)
Murphy, Christopher


Hamilton, W. W. (C'tral Fife)
Myles, David


Hampson, Dr Keith
Neale, Gerrard


Hannam, John
Needham, Richard


Haselhurst, Alan
Nelson, Anthony


Hastings, Stephen
Neubert, Michael


Havers, Rt Hon Sir Michael
Normanton, Tom


Hawkins, Sir Paul
O'Neill, Martin


Hayhoe, Barney
Onslow, Cranley


Heddle, John
Oppenheim, Rt Hon Mrs S.


Henderson, Barry
Osborn, John


Heseltine, Rt Hon Michael
Page, John (Harrow, West)


Hicks, Robert
Page, Richard (SW Herts)


Higgins, Rt Hon Terence L.
Parkinson, Rt Hon Cecil


Hill, James
Parris, Matthew


Hogg, Hon Douglas (Gr'th'm)
Patten, John (Oxford)


Holland, Philip (Carlton)
Pattie, Geoffrey


Hooson, Tom
Pawsey, James


Hordern, Peter
Percival, Sir Ian


Howe, Rt Hon Sir Geoffrey
Pink, R. Bonner


Howell, Ralph (N Norfolk)
Pollock, Alexander


Hunt, John (Ravensbourne)
Porter, Barry


Irvine, Bryant Godman
Price, Sir David (Eastleigh)


Irving, Charles (Cheltenham)
Prior, Rt Hon James


Jenkin, Rt Hon Patrick
Proctor, K. Harvey


Jessel, Toby
Raison, Rt Hon Timothy


Johnson Smith, Sir Geoffrey
Rathbone, Tim


Jopling, Rt Hon Michael
Rees, Peter (Dover and Deal)


Joseph, Rt Hon Sir Keith
Rees-Davies, W. R.


Kellett-Bowman, Mrs Elaine
Renton, Tim


Kershaw, Sir Anthony
Rhodes James, Robert


Kimball, Sir Marcus
Rhys Williams, Sir Brandon


King, Rt Hon Tom
Ridley, Hon Nicholas


Knight, Mrs Jill
Ridsdale, Sir Julian


Knox, David
Rifkind, Malcolm


Lambie, David
Rippon, Rt Hon Geoffrey


Lamont, Norman
Roberts, M. (Cardiff NW)


Lang, Ian
Roberts, Wyn (Conway)


Lawrence, Ivan
Robertson, George


Lee, John
Rossi, Hugh


Lennox-Boyd, Hon Mark
Rost, Peter


Lester, Jim (Beeston)
Rumbold, Mrs A. C. R.


Lewis, Kenneth (Rutland)
Sainsbury, Hon Timothy


Lloyd, Peter (Fareham)
St. John-Stevas, Rt Hon N.


Loveridge, John
Scott, Nicholas


Luce, Richard
Shaw, Giles (Pudsey)


Lyell, Nicholas
Shelton, William (Streatham)


Macfarlane, Neil
Shepherd, Colin (Hereford)


MacGregor, John
Shepherd, Richard


MacKay, John (Argyll)
Shersby, Michael


MacKenzie, Rt Hon Gregor
Silvester, Fred


Macmillan, Rt Hon M.
Sims, Roger


McNair-Wilson, M. (N'bury)
Skeet, T. H. H.


McNair-Wilson, P. (New F'st)
Smith, Dudley


Madel, David
Smith, Tim (Beaconsfield)


Major, John
Speed, Keith





Speller, Tony
Wakeham, John


Spicer, Jim (West Dorset)
Waldegrave, Hon William


Spicer, Michael (S Worcs)
Walker, Rt Hon P.(W'cester)


Sproat, Iain
Walker, B. (Perth)


Squire, Robin
Waller, Gary


Stanbrook, Ivor
Walters, Dennis


Stanley, John
Ward, John


Steen, Anthony
Watson, John


Stevens, Martin
Wells, Bowen


Stewart, A.(E Renfrewshire)
Wells, John (Maidstone)


Stewart, Ian (Hitchin)
Wheeler, John


Stokes, John
White, J. (G'gow Pollok)


Stradling Thomas, J.
Whitney, Raymond


Tapsell, Peter
Wickenden, Keith


Taylor, Teddy (S'end E)
Wiggin, Jerry


Temple-Morris, Peter
Wilkinson, John


Thomas, Rt Hon Peter
Williams, D.(Montgomery)


Thompson, Donald
Wilson, Gordon (Dundee E)


Thorne, Neil (Ilford South)
Winterton, Nicholas


Thornton, Malcolm
Wolfson, Mark


Townend, John (Bridlington)
Young, Sir George (Acton)


Townsend, Cyril D, (B'heath)
Younger, Rt Hon George


Trippier, David



Trotter, Neville
Tellers for the Noes:


van Straubenzee, Sir W.
Mr. David Hunt and


Viggers, Peter
Mr. Archie Hamilton.


Waddington, David

Question accordingly negatived.

Schedule 17

SUPPLEMENTARY PROVISIONS RELATING TO APRT

Mr. Wakeham: I beg to move amendment No. 141, in page 213, line 35, at end insert—

'Repayment of APRT

13A.—(1) If a participator in an oil field has an excess of APRT credit for the last of the chargeable periods referred to in section 134(1)(b) of this Act, then, on the making of a claim the amount of that excess shall be repaid to him.

(2) For the purposes of this paragraph there is an excess of APRT credit for the last of the chargeable periods referred to in subsection (1)(b) of section 134 of this Act if any of that credit would, apart from this paragraph, fall to be carried forward to the next chargeable period in accordance with subsection (4) of that section; and the amount of the excess is the amount of the credit which would fall to be so carried forward.

(3) A claim under sub-paragraph (1) above shall be made not earlier than two months after the expiry of the last chargeable period referred to in that sub-paragraph.

(4) In any case where—

a claim is made under sub-paragraph (1) above before an assessment is made for the chargeable period referred to in that sub-paragraph, and
(b) the APRT credit for that period exceeds the amount of tax which, in the statement delivered under section 1(1)(a) of the Petroleum Revenue Tax Act 1980, is shown to be payable by the participator concerned in accordance with the Schedule to that Act for that period in respect of the oilfield in question, the amount of the excess shall be repaid to the participator and that repayment shall be regarded as a payment on account of any amount which may fall to be repaid to him by virtue of sub-paragraph (1) above.

(5) Paragraph 10(4) above shall not apply to any amount of APRT which is repayable only on the making of a claim under sub-paragraph (1) above.

(6) Amounts repaid to a participator by virtue of this paragraph shall be disregarded in computing his income for the purposes of income tax or corporation tax.'.

Mr. Deputy Speaker: With this we may take Government amendments Nos. 143 and 144.

Mr. Wakeham: The amendments complete the package of modifications to the Budget oil taxation


proposals announced by the Chancellor on 9 June. The other proposals were implemented by amendments in Committee.
The effect of the amendments is to advance the time at which APRT that cannot be set off against PRT is repaid. Under the Budget proposals that would have been the end of field life; it will now be five years after the first payment. That will help the less profitable fields that pay APRT but little or no PRT.
At the same five-year point, amendments passed in Committee will cut off all future liability to APRT. That should provide a substantial protection for less profitable fields.
The amendments are proof of the fact that we take account of representations made by the oil industry. We find it extremely helpful when companies back up their representations with detailed figures about particular projects. I am extremely grateful to companies that have supplied information. We do a great of analytical work in Government on the figures that we have. We look at existing fields and we look at our best ideas of what future developments will be like. We looked very carefully at the field profiles that were prepared by the joint Government—UKOOA review of marginal fields a couple of years ago, but inevitably the details of actual projects under consideration are known to the companies alone.
I hope that in the forthcoming discussions with UKOOA about the tax regime companies will feel able to support their arguments with chapter and verse about individual projects.

Mr. Eggar: This is an important point relating to the evidence the will be given. Can my hon. Friend give us assurances that talks will be held not only with the industry body, UKOOA, but with individual companies about individual fields and that the talks will be held at a suitably high level with the Inland Revenue, if necessary with Treasury Ministers being present?

Mr. Wakeham: I give my hon. Friend that assurance and I add the comment that any information will be treated in the strictest confidence.

Mr. Peter Hardy: The Minister is on an important point. This is the eighth or ninth set of changes in the fiscal regime. Is he saying that until recent months or weeks the oil companies had failed to give the Treasury information that might have prevented the Government from making some of the incautious changes that were made a year or two ago?

Mr. Wakeham: I reject the hon. Gentleman's implied criticisms of the regime. There is much change and uncertainty in the oil world, and that is likely to continue for the foreseeable future. We are making sure that we get as close to the oil companies as we can. I do not complain about past co-operation; there has been a great deal, but I shall be writing to UKOOA on the review that my right hon. and learned Friend the Chancellor agreed with the association recently on some of the problems of the marginal fields and I shall urge that the oil companies be as forthcoming as possible, in the interests of getting a sensible tax regime for both the country and the companies.

Mr. Straw: We discussed the principle behind the amendments at length in Committee, but I have one question for the Minister of State. If he cannot answer it

now, perhaps he will write to me. How many fields are the changes likely to help, compared with the previous regime?

Mr. Wakeham: For the sake of accuracy, it would be better if I wrote to the hon. Gentleman.

Amendment agreed to.

Amendments made:

No. 142, in page 213, line 40 at end insert—
'(1A) For the purpose of determining whether the new participator is liable to pay an amount of APRT, but for no other purpose, subsection (1) of section 134 of this Act shall apply as if any gross profit which at any time before the transfer had accrued to the old participator from the field had accrued at that time to the new participator or, if the transfer is of part of the old participator's interest in the field, as if a corresponding part of that gross profit had at that time accrued to the new participator.'.

No. 143, in page 215, line 15 at end insert
'and (c) the date stated in that decision as the date on which the winning of oil from the field ceased is earlier than the expiry of the last of the chargeable periods specified in section 134(1)(b) of this Act.'.

No. 144 in page 215, line 16 leave out
'paid any amount of APRT'
and insert
'an amount of APRT credit'.—[Mr. Wakeham]

Clause 138

REDUCTION OF NATIONAL INSURANCE SURCHARGE

Mr. Brittan: I beg to move amendment No. 145, in page 120, line 1 at beginning insert—
'Subject to subsections (2A) and (2B) below'.

Mr. Deputy Speaker: With this we may take Government amendment No. 146.

Mr. Brittan: These amendments make local authorities and certain related bodies which are also financed partly through the rate support grant liable to pay the same rate of national insurance surcharge—3½ per cent.—for the whole of 1982–83. From 6 April 1983, local authorities will again become liable to the rate applicable to other employers—2½ per cent.— with the reduced cost being reflected in a lower rate support grant for 1983–84.
The amendments are designed to give effect in the area of local authorities with a minimum of administrative and distributional difficulties to the Chancellor's proposal in the Budget to take steps to ensure that public sector employers would be left in the same position as they would have been without the reductions in the national insurance surcharge which are due to take effect from 2 August Similar amendments are not required in respect of other public sector employers, for whom offsetting reductions have already been announced in the cash limits of central Government, including the National Health Service, and in the external financing limits of the nationalised industries and corporations. These will take full account in 1982–83 of the reduction in these bodies' national insurance surcharge burden which will occur after 2 August.
At the time of the Budget it was envisaged that the local authorities should, like other parts of the public sector, pay national insurance surcharge at an effective rate of 2 per cent. from August 1982 to April 1983. The intention was that the whole of their reduction in costs arising from that lower rate of national insurance surcharge would be offset through a reduced rate support grant, but the current amendments meet local authority objections to handling the matter in that way, which rested on the fact that the


distribution of grant abatement would not, and indeed could not, match the national insurance reduction for each local authority. In some cases, the discrepancies could have been substantial.
For that reason we have accepted that it would be distributionally fairer for local authorities to pay the higher rate of tax for the remainder of this financial year and for the adjustment to be made in the following year through the rate support grant. It is for those reasons that I commend the amendments to the House.

Mr. Straw: We have just spent two hours discussing the need for fairness in taxation. That need is recognised on both sides of the House. It is a fundamental principle of taxation that taxes should have an even application and that all in the same circumstances should be liable to the same rate of tax and to pay it on the same conditions.
Since local authorities and public sector corporations were treated in the same way as other corporations in the private sector when the national insurance surcharge was first introduced—in other words, they became liable to that surcharge, and when it was increased they became liable to the increases—it was expected that when the Government announced the much heralded reduction in the surcharge, local authorities and public sector corporations would be subject to a similar reduction.
It then emerged that because of the Government's ideological opposition to the public sector, which is plain from the many speeches from the Conservative Benches, they were going to claw back the reduction in the national insurance surcharge, but only from public sector employers. The result was discriminatory and also had the perverse effect of reducing the intended reflationary effect of the reduction in the national insurance surcharge.
1 am
As the Chief Secretary has remarked, the proposed method of clawback from local authorities which the Government originally had in mind would have been capricious in its effect. It would not have provided a proper readjustment through the rate support grant and the reduced NIS that local authorities were to pay. The right hon. and learned Gentleman referred to the distributional problems that would have arisen had the original proposal for clawback gone through and there had been a readjustment through the rate support grant. Those problems would have been substantial. Local authorities that did not receive grant would not have been subject to clawback through the mechanism.
The right hon. and learned Gentleman went on to say that, next year, clawback arrangements would be written into the RSG which did not involve a differential rate of national insurance surcharge. That is what I understood him to say. I see the Minister for Local Government and Environmental Services shaking his head. Are the Government clear that the procedure that they want to adopt for clawing back or offsetting the reduction in NIS through the rate support grant will fairly reflect the amount of employment of the local authorities and the lower amount that they pay as a result of the reduction in NIS?
As a result of substantial representations by local authorities, the Government have decided to change the clawback arrangements by the simple device of maintaining the old, higher rate of national insurance for local authorities. While the Opposition regard the whole

scheme of discrimination against the public sector as repugnant, we consider that this proposal for clawback is less undesirable than the original proposal. We shall not divide against it.
There are two further questions that I wish to put. The first concerns the effect of the change on direct labour organisations. The Government have been concerned to ensure that these organisations do not possess any competitive advantage over private sector builders. The result of the change, if unamended, will be that direct labour organisations, which are expected to have the same financial environment as private sector builders, will pay a higher rate of national insurance surcharge than private sector builders. That will place them at a competitive disadvantage. Will the Government make any adjustments in the rate of return imposed upon direct labour organisations so that they enjoy competitive neutrality with private sector companies?
The second point relates to the higher rate of national insurance surcharge on public transport authorities and London Transport. My information is that the Government's position is not clear. Is it intended that the higher rate should apply to passenger transport authorities and to London Transport? If so, will the appropriate adjustment be made in the grant?

Mr. Brittan: Consideration is being given to the means by which passenger transport authorities can be put on a par with other public sector bodies, with regard to the national insurance surcharge reduction. I cannot announce precisely how that will be done, but an announcement will be made in due course.
With regard to direct labour organisations, the differential impact of my proposal will be taken into account. I assure the hon. Member for Blackburn (Mr. Straw) that the offset in rate support grant for future years will leave local authorities neither better off nor worse off. That leads me to the substantial and central point that the hon. Gentleman made, which should not go uncorrected.
The hon. Gentleman implied that in some sense it was objectionable or unfair for the benefit of the national insurance surcharge reduction not to apply to public bodies. I remind the House that it applies not only to local authorities but to nationalised industries and central Government Departments.
The criticism that the hon. Gentleman makes totally ignores the purpose and the motive of the reduction in the national insurance surcharge. The cost of extending the benefit of the national insurance surcharge reduction to public bodies would have been £360 million in 1982–83 and £430 million in a full year. It is plain that within any given total level of relief for industry the effect of applying the national insurance surcharge reduction to the public sector would have meant that the relief to the private sector would have had to be correspondingly less. As the object of the exercise with regard to the national insurance surcharge reduction was to reduce the costs of the productive wealth-creating sections of society and the private sector embodying that, it made sense that the reduction in national insurance surcharge should be confined in that direction.
It is for those reasons that I commend the principle, as well as its application to local authorities, which is reflected in the amendments.

Amendment agreed to.

Amendment made: No. 146, in page 120, line 6 at end add—
'(2A) The amendments made by subsections (1) and (2) above do not apply to any secondary Class 1 contribution which any of the bodies specified in subsection (2B) below is liable to pay in respect of earnings paid in a tax week beginning before 6th April 1983; and accordingly in the case of any such contribution, the rate of surcharge shall continue to be 3½ per cent.
(2B) The bodies referred to in subsection (2A) above are—

(a) in England and Wales, those which, by virtue of section 53(5) of the Local Government, Planning and Land Act 1980, are local authorities for the purposes of Part VI of that Act;
(b) in Scotland, regional, islands and district councils,
(c) the Receiver for the Metropolitan Police District and the police authority for every police area other than that District;
(d) in Scotland, the fire authority for every area falling within a combined area;
(e) the committees established under paragraph 2 of Schedule 3 to the Powers of Criminal Courts Act 1973 (probation and after-care committees); and
(f) magistrates' courts committees, within the meaning of section 19 of the Justices of the Peace Act 1979, and the committee of magistrates referred to in section 35(1) of that Act (the committee for the inner London area).'.—[Mr. Brittan]

Clause 141

Mr. Ridley: We shall sell the shares when the market is right. That seems thoroughly sensible and to answer both hon. Members.
Finally, I note that the Opposition have opposed this proposal in the Oil and Gas (Enterprise) Bill Committee

and on this Bill both in Committee and today. Of course oil is a priceless asset and a source of tax as well as of oil, but the argument cannot be sustained that it can be secured only by the operation of public sector companies. The vast bulk of the oil won from the North Sea was won by private sector companies. Before oil was discovered there, it was won in other territory and brought to Britain by private sector companies, thus assuring tax revenue and security of supply to Britain.
On the happy note that the assets will pass to the good management of the private sector, the House will wish to resist the penultimate amendment to the Bill. The House will have done a good deed if it commits these clauses to law.

Question put, That the amendment be made:—

The House divided: Ayes 181, Noes 275.

Division No. 273]
[1.20 pm


AYES


Adams, Allen
Faulds, Andrew


Allaun, Frank
Field, Frank


Anderson, Donald
Flannery, Martin


Archer, Rt Hon Peter
Fletcher, Ted (Darlington)


Ashley, Rt Hon Jack
Ford, Ben


Ashton, Joe
Forrester, John


Atkinson, N.(H'gey,)
Foster, Derek


Bagier, Gordon A.T.
Foulkes, George


Barnett, Guy (Greenwich)
Fraser, J. (Lamb'th, N'w'd)


Barnett, Rt Hon Joel (H'wd)
Freeson, Rt Hon Reginald


Benn, Rt Hon Tony
Garrett, John (Norwich S)


Booth, Rt Hon Albert
Garrett, W. E. (Wallsend)


Boothroyd, Miss Betty
Graham, Ted


Bray, Dr Jeremy
Hamilton, James (Bothwell)


Brown, Hugh D. (Provan)
Hamilton, W. W. (C'tral Fife)


Brown, Ron (E'burgh, Leith)
Hardy, Peter


Buchan, Norman
Harrison, Rt Hon Walter


Callaghan, Jim (Midd't'n &amp; P)
Hart, Rt Hon Dame Judith


Campbell, Ian
Hattersley, Rt Hon Roy


Campbell-Savours, Dale
Haynes, Frank


Canavan, Dennis
Hogg, N. (E Dunb't'nshire)


Cant, R. B.
Holland, S. (L'b'th, Vauxh'll)


Carmichael, Neil
Homewood, William


Carter-Jones, Lewis
Hooley, Frank


Clark, Dr David (S Shields)
Howell, Rt Hon D.


Clarke, Thomas C'b'dge,A'rie
Hoyle, Douglas


Cocks, Rt Hon M. (B'stol S)
Huckfield, Les


Coleman, Donald
Hughes, Mark (Durham)


Concannon, Rt Hon J. D.
Hughes, Robert (Aberdeen N)


Cook, Robin F.
Janner, Hon Greville


Cowans, Harry
John, Brynmor


Craigen, J. M. (G'gow, M'hill)
Jones, Rt Hon Alec (Rh'dda)


Cryer, Bob
Jones, Barry (East Flint)


Cunliffe, Lawrence
Kaufman, Rt Hon Gerald


Cunningham, Dr J. (W'h'n)
Kerr, Russell


Davidson, Arthur
Kilroy-Silk, Robert


Davies, Rt Hon Denzil (L'lli)
Lamond, James


Davis, Clinton (Hackney C)
Leadbitter, Ted


Davis, Terry (B'ham, Stechf'd)
Leighton, Ronald


Deakins, Eric
Lewis, Ron (Carlisle)


Dean, Joseph (Leeds West)
Litherland, Robert


Dewar, Donald
Lofthouse, Geoffrey


Dixon, Donald
McCartney, Hugh


Dobson, Frank
McDonald, Dr Oonagh


Dormand, Jack
McElhone, Frank


Douglas, Dick
McGuire, Michael (Ince)


Dubs, Alfred
McKay, Allen (Penistone)


Duffy, A. E. P.
McKelvey, William


Dunnett, Jack
MacKenzie, Rt Hon Gregor


Dunwoody, Hon Mrs G.
McNamara, Kevin


Eadie, Alex
McTaggart, Robert


Eastham, Ken
McWilliam, John


Ellis, R. (NE D'bysh're)
Marks, Kenneth


English, Michael
Marshall, D (G'gow S'ton)


Ennals, Rt Hon David
Marshall, Jim (Leicester S)


Evans, Ioan (Aberdare)
Martin, M (G'gow S'burn)


Evans, John (Newton)
Maxton, John


Ewing, Harry
Maynard, Miss Joan






Meacher, Michael
Skinner, Dennis


Millan, Rt Hon Bruce
Soley, Clive


Miller, Dr M. S. (E Kilbride)
Spearing, Nigel


Morris, Rt Hon A. (W'shawe)
Spriggs, Leslie


Morris, Rt Hon C. (O'shaw)
Stoddart, David


Morton, George
Stott, Roger


Moyle, Rt Hon Roland
Strang, Gavin


Newens, Stanley
Straw, Jack


O'Neill, Martin
Summerskill, Hon Dr Shirley


Palmer, Arthur
Thorne, Stan (Preston South)


Park, George
Tilley, John


Parry, Robert
Tinn, James


Pavitt, Laurie
Torney, Tom


Pendry, Tom
Urwin, Rt Hon Tom


Powell, Raymond (Ogmore)
Varley, Rt Hon Eric G.


Prescott, John
Wainwright, E. (Dearne V)


Price, C. (Lewisham W)
Walker, Rt Hon H. (D'caster)


Race, Reg
Welsh, Michael


Radice, Giles
White, Frank R.


Rees, Rt Hon M (Leeds S)
White, J. (G'gow Pollok)


Richardson, Jo
Whitehead, Phillip


Roberts, Ernest (Hackney N)
Whitlock, William


Roberts, Gwilym (Cannock)
Williams, Rt Hon A. (S'sea W)


Robertson, George
Wilson, Gordon (Dundee E)


Robinson, G. (Coventry NW)
Wilson, William (C'try SE)


Rooker, J. W.
Winnick, David


Ross, Ernest (Dundee West)
Woodall, Alec


Rowlands, Ted
Woolmer, Kenneth


Sever, John
Wright, Sheila


Sheerman, Barry
Young, David (Bolton E)


Sheldon, Rt Hon R.



Shore, Rt Hon Peter
Tellers for the Ayes:


Short, Mrs Renée
Dr. Edmund Marshall and


Silkin, Rt Hon J. (Deptford)
Mrs. Austin Mitchell.


Silverman, Julius



NOES


Aitken, Jonathan
Cadbury, Jocelyn


Alison, Rt Hon Michael
Carlisle, John (Luton West)


Ancram, Michael
Carlisle, Kenneth (Lincoln)


Arnold, Tom
Carlisle, Rt Hon M. (R'c'n)


Aspinwall, Jack
Chalker, Mrs. Lynda


Atkins, Robert (Preston N)
Channon, Rt. Hon. Paul


Atkinson, David (B'm'th,E)
Chapman, Sydney


Baker, Nicholas (N Dorset)
Churchill, W. S.


Banks, Robert
Clark, Hon A. (Plym'th, S'n)


Beaumont-Dark, Anthony
Clark, Sir W. (Croydon S)


Bendall, Vivian
Clarke, Kenneth (Rushcliffe)


Bennett, Sir Frederic (T'bay)
Colvin, Michael


Benyon, Thomas (A'don)
Cope, John


Benyon, W. (Buckingham)
Corrie, John


Berry, Hon Anthony
Costain, Sir Albert


Best, Keith
Cranborne, Viscount


Bevan, David Gilroy
Crouch, David


Biffen, Rt Hon John
Dorrell, Stephen


Biggs-Davison, Sir John
Douglas-Hamilton, Lord J.


Blackburn, John
Dover, Denshore


Blaker, Peter
du Cann, Rt Hon Edward


Body, Richard
Dunn, Robert (Dartford)


Bonsor, Sir Nicholas
Durant, Tony


Boscawen, Hon Robert
Eden, Rt Hon Sir John


Bottomley, Peter (W'wich W)
Eggar, Tim


Bowden, Andrew
Elliott, Sir William


Boyson, Dr Rhodes
Eyre, Reginald


Braine, Sir Bernard
Fairbairn, Nicholas


Bright, Graham
Fairgrieve, Sir Russell


Brinton, Tim
Faith, Mrs Sheila


Brittan, Rt. Hon. Leon
Farr, John


Brooke, Hon Peter
Fell, Sir Anthony


Brotherton, Michael
Fenner, Mrs Peggy


Brown, Michael (Brigg &amp; Sc'n)
Finsberg, Geoffrey


Browne, John (Winchester)
Fisher, Sir Nigel


Bruce-Gardyne, John
Fletcher, A. (Ed'nb'gh N)


Bryan, Sir Paul
Fletcher-Cooke, Sir Charles


Buchanan-Smith, Rt. Hon. A.
Fookes, Miss Janet


Buck, Antony
Forman, Nigel


Budgen, Nick
Fowler, Rt Hon Norman


Bulmer, Esmond
Fox, Marcus


Burden, Sir Frederick
Fraser, Peter (South Angus)


Butcher, John
Gardner, Edward (S Fylde)





Glyn, Dr Alan
Monro, Sir Hector


Goodhart, Sir Philip
Montgomery, Fergus


Goodhew, Sir Victor
Moore, John


Goodlad, Alastair
Morris, M. (N'hampton S)


Gorst, John
Morrison, Hon C. (Devizes)


Gow, Ian
Morrison, Hon P. (Chester)


Grant, Anthony (Harrow C)
Mudd, David


Gray, Hamish
Murphy, Christopher


Greenway, Harry
Myles, David


Griffiths, E. (B'y St. Edm'ds)
Neale, Gerrard


Griffiths, Peter Portsm'th N)
Needham, Richard


Grylls, Michael
Nelson, Anthony


Gummer, John Selwyn
Neubert, Michael


Hamilton, Hon A.
Newton, Tony


Hamilton, Michael (Salisbury)
Normanton, Tom


Hampson, Dr Keith
Onslow, Cranley


Hannam, John
Oppenheim, Rt Hon Mrs S.


Haselhurst, Alan
Osborn, John


Hastings, Stephen
Page, John (Harrow, West)


Havers, Rt Hon Sir Michael
Page, Richard (SW Herts)


Hawkins, Sir Paul
Parkinson, Rt Hon Cecil


Hayhoe, Barney
Parris, Matthew


Heddle, John
Patten, John (Oxford)


Henderson, Barry
Pattie, Geoffrey


Heseltine, Rt Hon Michael
Pawsey, James


Hicks, Robert
Percival, Sir Ian


Higgins, Rt Hon Terence L.
Pink, R. Bonner


Hill, James
Pollock, Alexander


Hogg, Hon Douglas (Gr'th'm)
Porter, Barry


Holland, Philip (Carlton)
Price, Sir David (Eastleigh)


Hooson, Tom
Prior, Rt Hon James


Hordern, Peter
Proctor, K. Harvey


Howe, Rt Hon Sir Geoffrey
Raison, Rt Hon Timothy


Howell, Ralph (N Norfolk)
Rathbone, Tim


Hunt, John (Ravensbourne)
Rees, Peter (Dover and Deal)


Irvine, Bryant Godman
Rees-Davies, W. R.


Jessel, Toby
Renton, Tim


Johnson Smith, Sir Geoffrey
Rhodes James, Robert


Jopling, Rt Hon Michael
Rhys Williams, Sir Brandon


Joseph, Rt Hon Sir Keith
Ridley, Hon Nicholas


Kellett-Bowman, Mrs Elaine
Ridsdale, Sir Julian


Kershaw, Sir Anthony
Rifkind, Malcolm


Kimball, Sir Marcus
Rippon, Rt Hon Geoffrey


King, Rt Hon Tom
Roberts, M. (Cardiff NW)


Knight, Mrs Jill
Roberts, Wyn (Conway)


Knox, David
Rossi, Hugh


Lang, Ian
Rost, Peter


Lawrence, Ivan
Rumbold, Mrs A. C. R.


Lee, John
Sainsbury, Hon Timothy


Lennox-Boyd, Hon Mark
St. John-Stevas, Rt Hon N.


Lester, Jim (Beeston)
Scott, Nicholas


Lewis, Kenneth (Rutland)
Shaw, Giles (Pudsey)


Lloyd, Peter (Fareham)
Shelton, William (Streatham)


Loveridge, John
Shepherd, Colin (Hereford)


Luce, Richard
Shepherd, Richard


Lyell, Nicholas
Shersby, Michael


Macfarlane, Neil
Silvester, Fred


MacGregor, John
Sims, Roger


MacKay, John (Argyll)
Skeet, T. H. H.


Macmillan, Rt Hon M.
Smith, Dudley


McNair-Wilson, M. (N'bury)
Smith, Tim (Beaconsfield)


McNair-Wilson, P. (New F'st)
Speed, Keith


Madel, David
Speller, Tony


Major, John
Spicer, Jim (West Dorset)


Marland, Paul
Spicer, Michael (S Worcs)


Marten, Rt Hon Neil
Sproat, Iain


Mather, Carol
Squire, Robin


Maude, Rt Hon Sir Angus
Stainton, Keith


Mawby, Ray
Stanbrook, Ivor


Mawhinney, Dr Brian
Stanley, John


Maxwell-Hyslop, Robin
Steen, Anthony


Mayhew, Patrick
Stevens, Martin


Mellor, David
Stewart, A. (E Renfrewshire)


Meyer, Sir Anthony
Stewart, Ian (Hitchin)


Miller, Hal (B'grove)
Stokes, John


Mills, Iain (Meriden)
Stradling Thomas, J.


Mills, Sir Peter (West Devon)
Tapsell, Peter


Miscampbell, Norman
Taylor, Teddy (S'end E)


Mitchell, David (Basingstoke)
Temple-Morris, Peter


Moate, Roger
Thomas, Rt Hon Peter






Thompson, Donald
Wells, Bowen


Thorne, Neil (Ilford South)
Wells, John (Maidstone)


Thornton, Malcolm
Wheeler, John


Townend, John (Bridlington)
Whitney, Raymond


Townsend, Cyril D, (B'heath)
Wickenden, Keith


Trippier, David
Wiggin, Jerry


Trotter, Neville
Wilkinson, John


van Straubenzee, Sir W.
Williams, D. (Montgomery)


Viggers, Peter
Winterton, Nicholas


Waddington, David
Wolfson, Mark


Wakeham, John
Young, Sir George (Acton)


Waldegrave, Hon William
Younger, Rt Hon George


Walker, B. (Perth)



Waller, Gary
Tellers for the Noes:


Walters, Dennis
Mr. David Hunt and


Ward, John
Mr. Tristan Garel-Jones.


Watson, John

Amendment accordingly negatived.

TRANSFER OF ASSETS OF BRITISH NATIONAL OIL CORPORATION

Mr. Cook: I beg to move amendment No. 147, in page 121, line 31, leave out clause 141.

Mr. Deputy Speaker: With this it will be convenient to take amendment No. 148, in page 122, line 8, leave out clause 142.

Mr. Cook: The purpose of these two amendments is to leave out clauses 141 and 142. Those two clauses provide a favourable tax regime for the hiving-off of the assets of BNOC and British Gas. They provide that when any such disposal takes place in future, it will not trigger a charge under capital gains tax or development land tax.
The House will be aware that the opposition are opposed to any such disposal. We believe that our North Sea oil represents one of the major national strategic assets of Great Britain. It provides us with a secure energy supply, the means of transforming our balance of payments and generous tax revenues. Against that background of the importance of that asset to the British national interest, it is perverse that we should not have a direct public sector share in that asset. Were we to divest ourselves of the public sector share we would be unusual among oil-producing nations in that we would not have our own public sector company capable of protecting the national interest in that asset.
British Gas is such a successful company that Conservative Members have been using a covert method of taxation through the gas levy. So enterprising is that company that Conservative Members constantly criticise it for its successful contract, by means of which British consumers have been able to enjoy gas at a cheaper price than could have been provided by the free market under any conceivable system of free market competition.
Therefore, as the object of the clauses is to pave the way for the disposal of the assets of the companies and threaten that successful record, it logically follows that we object to those clauses. In Committee, the Financial Secretary

said that the clauses were necessary, otherwise potential investors who might buy the public sector companies might be deterred. If that is so, it is an eminently good reason for leaving the clauses out of the Bill and carrying the amendments.
I invite the Minister to correct what I hope was an error in Committee. In relation to the sale of British Gas, the Financial Secretary said:
I confirm that it is our intention to ask the BGC to transfer its assets both in oil fields and gas fields in the sea" — [Official Report, Standing Committee A, 22 June 1982; c. 869.]
That flatly contradicts what the Under-Secretary of State for Energy said in Committee on the Oil and Gas (Enterprise) Bill. He said:
At present there are no plans for BGS's interests in gas fields to be privatised."—[Official Report, Standing Committee E, 2 March 1982; c. 682.]
He could not have been clearer. The Committee eagerly and willingly accepted that undertaking.
The Opposition have their reservations about the clauses. We hope to persuade the House to strike them out of the Bill. Whatever may be said for them and the House's scrutiny of them, I hope that we shall get through our debate on them without widening privatisation and increasing the number of assets that are stripped off BGC.
I hope that we shall be told that the Financial Secretary was in error and that the Government stand by what the Under-Secretary of State for Energy said. I hope that it will be reinforced in the urgings of the Secretary of State for Energy to his colleagues that the Government have no plans to dispose of BGC's gas fields.
We meet only 14 hours after the OPEC conference broke up is disarray. Yesterday's Financial Times described that event as giving rise to the gravest crisis in the history of OPEC. Spot oil prices have been tumbling, companies' oil shares have been declining for some time and are likely to accelerate in that direction. It is doubtful whether either of those developments will be reversed before the end of next year.
If Conservative Members wanted an historic moment at which to receive the least return for the sale of oil assets, they could not have done better than hit upon 1982. If any Conservative Member consulted his broker about whether now was a good time to dispose of his oil shares, it is extremely doubtful whether the broker would advise him to do so in the present climate or in any foreseeable one.
Perhaps the Secretary of State for Energy will answer. He would make a pleasant change from the Treasury Ministers that we have had to put up with for the past six weeks. We are entitled to ask whether, given that any private individual would now receive advice not to dispose of his assets, the Government seriously intend to press ahead with the sale of public interests, even though the price will be depressed—certainly until the next Finance Bill.
When that matter was raised on the Oil and Gas (Enterprise) Bill, the Minister said:
We would not arrange for the sale of shares merely to meet a timetable. I made our objectives clear and said that we were anxious to obtain the best possible price."—[Official Report, 31 March 1982; Vol. 21, c. 350.]
The best possible price will not be obtained this year.
As I assume that a Treasury Minister will reply to the debate, although there seems lo be some doubt about that at the moment, I hope that as Treasury Ministers have responsibility for the revenue, expenditure and assets of the nation they will make it clear that whatever rash


intentions the Secretary of State for Energy may have he will not be permitted to dispose of those assets in the next year at the depressed price that would be obtained for them.
When we considered the clause relating to the BGC in Committee, the Financial Secretary indicated a certain distaste for its provisions. He said:
I do not like having to give tax relief to pampered public sector bodies".—[Official Report, Standing Committee A, 22 June 1982; c. 869.]
The only way in which one could describe the BGC or BNOC as pampered at the moment is in the sense that lambs are fattened for slaughter. It is an insult to suggest that either company has been pampered. BNOC is an expansionary, dynamic company that has held its own in a very competitive industry. The BGC has provided its product reliably throughout the nation and in the past two decades has changed its infrastructure and achieved productivity gains that shame the private sector.
The reward for those two companies is that they should have their assets stripped—a decision which has no logic other than the prejudice of Conservative Members that wherever profits occur they should be handed over to the private sector. That prejudice has the happy corollary for them of ensuring that only loss-making enterprises remain in the public sector, thus confirming their other prejudice that companies operating in the public sector must by definition be failures.
The Opposition do not share that dismal vision of the public sector. We shall therefore vote against these clauses which pave the way for the Conservatives to turn their prejudice into reality.

Mr. Ridley: I am beginning to be dimly aware that the Opposition do not favour the privatisation of BNOC and parts of the BGC. In this context, I wish to correct two small errors straight away.
First, I said that without these clauses the uncertainty about capital gains tax liability would not so much deter investors from buying the shares as deter them from paying the most advantageous price that could be obtained for the nation. In the aftermath of Amersham International, I am sure that the Opposition would not wish to do anything that would put at risk the amount of money received from the sale of shares.
Secondly, I willingly acknowledge that only the oilfields in the sea are included in my right hon. Friend's plans.
Of course the Government will time the sale of the assets as and when it is believed that the timing is right. If a higher authority than me is required, may I say that my right hon. Friend the Prime Minister, in referring to this at Question Time on 8 July, used the words:
… if the market is right".—[Official Report, 8 July 1982; Vol. 27, c. 455.]
We shall sell the shares when the market is right.

Mr. Edward Rowlands: 

Clause 150

SHORT TITLE, INTERPRETATION, CONSTRUCTION AND REPEALS

Mr. Brittan: I beg to move amendment No. 152, in page 125, line 39, at end insert—
'(7) The provisions of Part XI of Schedule 20 to this Act, except in so far as they relate to the Wellington Museum Act 1947 and the Finance (No. 2) Act 1975, shall have effect in substitution for the provisions of section B of Part VI of Schedule 20 to the Finance Act 1980 and, accordingly, that Section shall be deemed not to have taken effect at the beginning of the year 1982–83.'.
The purpose of the amendment is to preserve the provisions governing the apportioning of dependent relative allowances when two claimants cannot agree on how they should be split. The provisions were accidentally omitted or repealed as a result of the operation of the Finance Act 1980, and the amendment seeks to correct that error.

Amendment agreed to.

Orders of the Day — New Schedule

CAPITAL ALLOWANCES FOR DWELLING-HOUSES LET ON ASSURED TENANCIES

Initial allowances

1.—(1) Subject to the provisions of this Schedule, where an approved body incurs capital expenditure on the construction of a building which is to be or to include a qualifying dwelling-house, then, for the chargeable period related to the incurring of that expenditure an allowance (in this Schedule referred to as an "initial allowance") shall be made to that body in respect of each qualifying dwelling-house to be comprised in the building.

(2) An initial allowance in respect of a qualifying dwelling-house shall be of an amount equal to three-quarters of the capital expenditure appropriate to that dwelling-house

(3) No initial allowance shall be made in respect of any expenditure if, when the dwelling-house to which it relates comes to be used, it is not a qualifying dwelling-house; and where an initial allowance has been granted in respect of any expenditure otherwise than in accordance with the provisions of this paragraph, all such assessments shall be made as are necessary to secure that effect is given to those provisions.

(4) For the purposes of this Schedule, the capital expenditure appropriate to a dwelling-house shall be determined as follows:—

(a) if the building concerned consists of a single qualifying dwelling-house, then, subject to the relevant limit, the whole of the capital expenditure referred to in subparagraph (1) above is appropriate to that dwelling-house; and

(b) in the case of a dwelling-house which forms part of a building, the capital expenditure appropriate to it is, subject to the relevant limit, the aggregate of—


(i) that proportion of the capital expenditure referred to in sub-paragraph (1) above which is properly attributable to the construction of that dwelling-house; and
(ii) where there are common parts of the building, such proportion of the capital expenditure on those common parts as it is just and reasonable to attribute to the dwelling-house and as does not exceed one-tenth of that proportion of the capital expenditure referred to in paragraph (i) above;

and in this Schedule "the relevant limit" means £60,000, if the dwelling-house is in Greater London, and £40,000 if it is elsewhere.

(5) In sub-paragraph (4) above "common parts", in relation to a building, means common parts of the building which—

(a) are not intended to be in separate occupation (whether for domestic, commercial or other purposes); and
(b) are intended to be of benefit, to some or all of the qualifying dwelling-houses included in the building;

and the capital expenditure on any such parts of the building is so much of the expenditure referred to in sub-paragraph (1) above as it is just and reasonable to attribute to those parts.

Writing-down allowances

2.—(1) Subject to the provisions of this Schedule, where—

(a) an approved body or a body which has been an approved body is, at the end of a chargeable period or its basis period, entitled to an interest in a building, and
(b) at the end of that chargeable period or its basis period, the building is or includes a qualifying dwelling-house or two or more qualifying dwelling-houses, and
(c) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building, an allowance (in this Schedule referred to as "a writing-down allowance") shall be made to that body for that chargeable period in respect of the dwelling-house or, as the case may be, each dwelling-house falling within paragraph (b) above.

(2) The writing-down allowance in respect of a dwelling-house shall be equal to one twenty-fifth of the capital expenditure which is appropriate to that dwelling-house, except that for a chargeable period of less than a year that fraction shall be proportionately reduced.

(3) If, in the case of a building which is or includes a qualifying dwelling-house, —

(a) the interest which is the relevant interest in relation to any expenditure is sold, and
(b) the sale is an event to which paragraph 4(1) below applies, then (subject to any further adjustment under this sub-paragraph on a later sale) the writing-down allowance in respect of that dwelling-house for any chargeable period, if that chargeable period or its basis period ends after the time of the sale, shall be the residue, as defined in paragraph 7(1) below, of that expenditure immediately after the sale, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired at the date of the sale of the period of 25 years beginning with the time when the building was first used.

(4) Notwithstanding anything in the preceding provisions of this paragraph, in no case shall the amount of a writing-down allowance made to a body for any chargeable period in respect of any expenditure exceed what, apart from the writing-off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of that chargeable period or its basis period.

Qualifying dwelling-house

3.—(1) In this Schedule "qualifying dwelling-house" means, subject to the following provision of this paragraph, a dwelling-house let on a tenancy which is for the time being an assured tenancy, within the meaning of section 56 of the Housing Act 1980.

(2) Without prejudice to section 57 of the Housing Act 1980 (by virtue of which certain tenancies continue to be treated as assured tenancies notwithstanding that the landlord has ceased to be an approved body by reason of a variation in the description of bodies for the time being approved) a dwelling-house which has been a qualifying dwelling-house by virtue of sub-paragraph (1) above shall be regarded as a qualifying dwelling-house at any time when—



(a) it is for the time being subject to a regulated tenancy or a housing association tenancy; and
(b) the landlord under that tenancy either is an approved body or was an approved body but has ceased to be such for any reason.

(3) Notwithstanding that a dwelling-house is let as mentioned in sub-paragraph (1) or sub-paragraph (2) above, it is not a qualifying dwelling-house for the purposes of this Schedule—

(a) unless the landlord is for the time being entitled to the relevant interest in the dwelling-house or is the person who incurred the capital expenditure on the construction of the building in which the dwelling-house is comprised; or
(b) if the landlord is a housing association which is approved for the purposes of section 341 of the Taxes Act (cooperative housing associations) or is a self-build society, within the meaning of Part I of the Housing Act 1974; or
(c) if the landlord and the tenant are connected persons; or
(d) if the tenant is a director of a company which is or is connected with the landlord; or
(e) if the landlord is a close company and the tenant is, for the purposes of Chapter III of Part XI of the Taxes Act, a participator in that company or an associate of such a participator; or
(f) if the tenancy is entered into as part of an arrangement between the landlords (or owners) of different dwelling-houses under which one landlord takes a person as a tenant in circumstances where, if that person was the tenant of a dwelling-house let by the other landlord, that dwelling-house would not be a qualifying dwelling-house by virtue of any of paragraphs (c) to (e) above;

and section 533 of the Taxes Act (connected persons) applies for the purposes of this sub-paragraph.

(4) In this paragraph "regulated tenancy" and "housing association tenancy" have the same meaning as in the Rent Act 1977.

Balancing allowances and balancing charges

4.—(1) Where any capital expenditure has been incurred on the construction of such a building as is referred to in paragraph 1(1) above and any of the following events occur while a dwelling-house comprised in that building is a qualifying dwelling-house, that is to say—

(a) the relevant interest in the dwelling-house is sold, or
(b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled to it acquiring the interest which is reversionary on it, or
(c) the dwelling-house is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used,

then, subject to sub-paragraph (2) below, for the chargeable period related to that event an allowance or charge (in this Schedule referred to as a "balancing allowance" or a "balancing charge") shall, in the circumstances mentioned below, be made to or, as the case may be, on the person entitled to the relevant interest immediately before that event occurs.

(2) No balancing allowance or balancing charge shall be made by reason of any event occurring more than twenty-five years after the dwelling-house was first used.

(3) Subject to paragraph 5 below, where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount of it shall be the amount of that residue or, as the case may be, of the excess of that residue over those moneys.

(4) Subject to paragraph 5 below, if the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the residue is nil, to those moneys.

(5) The provision of section 78 of and Schedule 7 to the Capital Allowance Act 1968 (special provisions as to certain sales) apply for the purposes of this Schedule as they apply in relation to the sale of an industrial building and as if—

(a) any reference in these provisions to Part I of that Act to this Schedule; and
(b) for the words in sub-paragraph (2)(a) of paragraph 4 of that Schedule following "the case of" there were substituted the words "a qualifying dwelling-house, the residue of the expenditure immediately before the sale, computed in accordance with paragraph 7 of Schedule

(Capital allowances for dwelling-houses let on assured tenancies) to the Finance Act 1982"; and
(c) for paragraphs (a) and (b) of sub-paragraph (3) of paragraph 4 of that Schedule there were substituted the words "both the seller and the buyer are at the time of the sale approved bodies, as defined in section 56(4) of the Housing Act 1980".

(6) For the purposes of this Schedule, any transfer of the relevant interest in a dwelling-house, otherwise than by way of sale, shall be treated as a sale of that interest for a price other than that which it would have fetched if sold on the open market; and if Schedule 7 to the Capital Allowances Act 1968 would not, apart from this sub-paragraph have effect in relation to a transfer treated as a sale by virtue of this sub-paragraph, that Schedule shall have effect in relation to it as if it were a sale falling within paragraph 1(1)(a) of that Schedule.

(7) Notwithstanding anything in the preceding provisons of this paragraph (or in paragraph 5 below), in no case shall the amount on which a balancing charge is made on any person in respect of any expenditure on the construction of a dwelling-house comprised in a building exceed the amount of the initial allowance, if any, made to him in respect of the expenditure appropriate to that dwelling-house together with the amount of any writing-down allowances made to him in respect of that expenditure for chargeable periods which end on or before the date of the event giving rise to the charge or of which the basis period ends on or before that date.

5.—(1) If, in a case where paragraph 4(1) above applies, a dwelling-house which had been a qualifying dwelling-house was not, for any part of the relevant period, such a dwelling-house, the provisions of this paragraph shall have effect instead of subparagraphs (3) and (4) of paragraph 4 above.

(2) Subject to sub-paragraph (4) below, where the sale, insurance, salvage or compensation moneys are not less than the capital expenditure appropriate to the dwelling-house, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the allowances given.

(3) Subject to sub-paragraph (4) below, where there are no sale, insurance, salvage or compensation moneys or where those moneys are less than the capital expenditure appropriate to the dwelling-house, then—

(a) if the adjusted net cost of the dwelling-house exceeds the allowances given, a balancing allowance shall be made and the amount thereof shall be an amount equal to the excess;
(b) if the adjusted net cost of the dwelling-house is less than the allowances given, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the shortfall.

(4) No balancing charge or allowance shall be made under this paragraph on the occasion of a sale if, by virtue of paragraph 4 of Schedule 7 to the Capital Allowances Act 1968, as applied by paragraph 4(5) above, the dwelling-house is treated as having been sold for a sum equal to the residue of the expenditure before the sale.

(5) In this paragraph—
the relevant period" means the period beginning at the time when the dwelling-house was first used for any purpose and ending with the event giving rise to the balancing allowance or balancing charge, except that where there has been a sale of the dwelling-house after that time and before that event the relevant period shall begin on the day following that sale or, if there has been more than one such sale, the last such sale;
the capital expenditure" means—

(a) where paragraph (b) of this definition does not apply, the capital expenditure incurred (or by virtue of paragraph 8 below deemed to have been incurred) on the construction of the dwelling-house;
(b) where the person to or on whom the balancing allowance or balancing charge falls to be made is not the person who incurred (or is deemed to have incurred) that expenditure the residue of that expenditure at the beginning of the relevant period,

together (in either case) with any amount to be added to the residue of that expenditure by virtue of paragraph 7(9) below;
the allowances given" means the allowance referred to in paragraph 4(7) above;
the adjusted net cost" means—



(a) where there are no sale, insurance, salvage or compensation moneys, the capital expenditure appropriate to the dwelling-house; and
(b) where those moneys are less than that expenditure, the amount by which they are less, reduced (in either case) in the proportion that the part of the aggregate of the parts, of the relevant period for which the building is a qualifying dwelling-house bears to the whole of that period.

6.—(1) If a dwelling-house ceases to be a qualifying dwelling-house otherwise than by reason of a sale or transfer of the relevant interest in it, that relevant interest shall be treated for the purposes of this Schedule as having been sold, at the time the dwelling-house ceases to be a qualifying dwelling-house, for the price which it would have fetched if sold in the open market.

(2) For the purposes of this Schedule, a dwelling-house shall not be regarded as ceasing altogether to be used by reason that it falls temporarily out of use, and where, immediately before any period of temporary disuse, it is a qualifying dwelling-house, it shall be regarded as continuing to be a qualifying dwelling-house during the period of temporary disuse.

Writing off of expenditure and meaning of "residue of expenditure"

7.—(1) Any expenditure appropriate to a qualifying dwelling-house shall be treated for the purposes of this Schedule as written off to the extent and as at the times specified below, and references in this Schedule to the residue of any such expenditure shall be construed accordingly.

(2) Where an initial allowance is made in respect of a qualifying dwelling-house, the amount of that allowance shall be treated as written off as at the time when the qualifying dwelling-house is first used.

(3) Where, by reason of the whole or part of a building being at any time a qualifying dwelling-house, a writing-down allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall, subject to subparagraph (4) below, be treated as written off as at that time.

(4) Where, at a time which is material for the purposes of sub-paragraph (3) above, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be treated as written off by that sub-paragraph as at that time shall be taken into account in computing the residue of that expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.

(5) If, for any period or periods between the time when the whole or part of a building was first used for any purpose and the time at which the residue of the expenditure falls to be ascertained, the building or part, as the case may be, has not been a qualifying dwelling-house, there shall in ascertaining that residue be treated as having been previously written off in respect of the said period or periods amounts equal to writing-down allowances made for chargeable periods of a total length equal thereto at such rate or rates as would have been appropriate having regard to any sale on which paragraph 2(3) above operated.

(6) where, on the occasion of a sale, a balancing allowance is made in respect of the expenditure, there shall be treated as written off as at the time of the sale the amount by which the residue of the expenditure before the sale exceeds the net proceeds of the sale.

(7) Where, on the occasion of a sale, a balancing charge is made in respect of the expenditure, the residue of the expenditure shall be deemed for the purposes of this Schedule to be increased as at the time of the sale by the amount on which the charge is made.

(8) Where, on the occasion of a sale, a balancing charge is made under paragraph 5(3)(b) above in respect of the expenditure and, apart from this sub-paragraph, the residue of the expenditure immediately after the sale would by virtue of sub-paragraph (7) above be deemed to be greater than the net proceeds of the sale, the residue immediately after the sale shall be deemed for the purposes of this Schedule to be equal to the net proceeds.

(9) Where a dwelling-house is demolished, and the demolition gives rise, or might give rise, to a balancing allowance or charge under this Schedule to or on the person incurring the cost of demolition, the net cost to him of the demolition (that is to say the excess, if any, of the cost of the

demolition over any moneys received for the remains of the property) shall be added for the purposes of this Schedule to the residue, immediately before the demolition, of the expenditure appropriate to the dwelling-house; and if this sub-paragraph applies to the net cost to a person of the demolition of any property, the cost or net cost shall not be treated, for the purpose of this Schedule, as expenditure incurred in respect of any other property by which that property is replaced.

Buildings bought unused

8.—(1) Subject to sub-paragraph (2) below, where expenditure is incurred on the construction of such a building as is referred to in paragraph 1(1) above and the relevant interest in that building is sold before any of the dwelling-houses comprised in it are used,

(a) the expenditure actually incurred on the construction of the building shall be left out of account for the purposes of the preceding provisions of this Schedule; but
(b) the person who buys that interest shall be deemed for those purposes to have incurred on the date when the purchase price becomes payable, expenditure on the construction of the building equal to the expenditure actually incurred or to the net price paid by him for that interest, whichever is the less.

(2) Where the relevant interest in such a building as is referred to in paragraph 1(1) above is sold more than once before any of the dwelling-houses comprised in it is used, the provisions of sub-paragraph (1)(b) above shall have effect only in relation to the last of those sales.

(3) Where the expenditure incurred on the construction of such a building as is referred to in paragraph 1(1) above was incurred by a person carrying on a trade which consists, as to the whole or any part thereof, in the construction of buildings with a view to their sale, and, before any of the dwelling-houses comprised in it is used, he sells the relevant interest in the building in the course of that trade, or, as the case may be, of that part of that trade, paragraph (b) of sub-paragraph (1) above shall have effect subject to the following modifications—

(a) if that sale is the only sale of the relevant interest before any of the dwelling-house comprised in the building is used that paragraph shall have effect as if the words "the expenditure actually incurred or to" and the words "whichever is the less" were omitted, and
(b) in any other case, that paragraph shall have effect as if the reference to the expenditure actually incurred on the construction of the building were a reference to the price paid on that sale.

Manner of making allowances and charges

9.—(1) Any allowance under this Schedule shall be made to a person by way of discharge or repayment of tax and shall be available primarily against the following income, that is to say—

(a) income taxed under Schedule A in respect of any premises which at any time in the chargeable period consist of a qualifying dwelling-house; or
(b) income which is the subject of a balancing charge under this Schedule.

(2) Effect shall be given to a balancing charge to be made on a person—

(a) if it is a charge to income tax, by making the charge under Case VI of Schedule D,
(b) if it is a charge to corporation tax, by treating the amount on which the charge is to be made as income of the description in sub-paragraph (1)(a) above.

Expenditure on repair of buildings

10. This Schedule shall have effect in relation to capital expenditure incurred by a person on repairs to any part of a building as if it it were capital expenditure incurred by him in the construction for the first time of that part of the building.

Exclusion of double allowances

11. No allowance shall be made under this Schedule in respect of any expenditure on a building or in respect of a dwelling-house if for the same or any other chargeable period an allowance is or can be made under any provisions of Chapter V of Part I of the Capital Allowances Act 1968 (agricultural land or buildings) in respect of that expenditure or that dwelling-house.

Holding over by lessee, etc.

12.—(1) Where the relevant interest in relation to the capital expenditure incurred on the construction of a building is an


interest under a lease, this Schedule shall have effect subject to the following provisions of this paragraph, and in those provisions—

(a) except in sub-paragraph (5), any reference to a lessor or lessee is a reference to the lessor or lessee under that lease and
(b) in sub-paragraph (5) the reference to the first lease is a reference to that lease.

(2) Where, with the consent of the lessor, a lessee of any building remains in possession thereof after the termination of the lease without a new lease being granted to him, that lease shall be deemed for the purposes of this Schedule to continue so long as he remains in possession as aforesaid.

(3) Where, on the termination of a lease, a new lease is granted to the lessee in pursuance of an option available to him under the terms of the first lease, the provisions of this Schedule shall have effect as if the second lease were a continuation of the first lease.

(4) Where, on the termination of a lease, the lessor pays any sum to the lessee in respect of a building comprised in the lease, the provisions of this Schedule shall have effect as if the lease had come to an end by reason of the surrender thereof in consideration of the payment.

(5) Where, on the termination of a lease, another lease is granted to a different lessee and, in connection with the transaction, that lessee pays a sum to the person who was the lessee under the first lease, the provisions of this Schedule shall have effect as if both leases were the same lease and there had been an assignment thereof by the lessee under the first lease to the lessee under the second lease in consideration of the payment.

Meaning of "the relevant interest"

13.—(1) Subject to the provisions of this paragraph, in this Schedule "the relevant interest" means,—

(a) in relation to any expenditure incurred on the construction of a building, the interest in that building to which the person who incurred the expenditure was entitled when he incurred it; and
(b) in relation to a dwelling-house comprised in such a building as is referred to in paragraph 1(1) above, that interest, to the extent that it subsists in the dwelling-house, which is the relevant interest in relation to the capital expenditure incurred on the construction of that building.

(2) Where, when it incurs expenditure on the construction of a building, a body is entitled to two or more interests in the building and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purposes of this Schedule.

(3) An interest shall not cease to be the relevant interest for the purposes of this Schedule by reason of the creation of any lease or other interest to which that interest is subject, and where the relevant interest is a leasehold interest and is extinguished by reason of the surrender thereof or on the body entitled thereto acquiring the interest which is reversionary on it, the interest into which that leasehold interest merges shall thereupon become the relevant interest.

Application of provisions of Capital Allowances Act 1968

14. The following provisions of the Capital Allowances Act 1968, namely—

section 71 to 74 (income tax and corporation tax allowances and charges),
section 76 (companies not resident in the United Kingdom),
subsections (1) to (3) of section 77 (apportionment of consideration etc.),
section 81 (procedure on apportionments),
subsections (1) and (3) of section 82 (interpretation of certain references to expenditure etc.),
section 84 (subsidies),
section 86 (meaning of "sale, insurance, salvage or compensation moneys"), and
subsections (1), (3) and (6) of section 87 (interpretationof Part I),

shall apply for the purposes of this Schedule as they apply for the purposes of Part I of that Act and, accordingly, any reference in those provisions to part I of that Act shall include a reference to this Schedule.

Interpretation

15.—(1) In this Schedule—

"approved body" has the meaning given by section 56(4) of the Housing Act 1980;

"building", except where the context otherwise requires, includes part of a building;
"dwelling-house" except where the context otherwise requires, has the same meaning as in the Rent Act 1977; "expenditure appropriate to a dwelling-house" has the meaning given by paragraph 1(4) above; and
"qualified dwelling-house" has the meaning given by paragraph 3 above.

(2) References in this Schedule to expenditure incurred on the construction of a building do not include any expenditure incurred on the acquisition of, or of rights in or over, any land.

(3) A person who has incurred expenditure on the construction of a building shall be deemed, for the purposes of any provision to this Schedule referring to his interest therein at the time when the expenditure was incurred, to have had the same interest therein as if the construction thereof had been completed at that time.

(4) Without prejudice to any of the other provisions of this Schedule relating to the apportionment of sale, insurance, salvage or compensation moneys, the sum paid on the sale of the relevant interest in a building or structure, or any other sale, insurance, salvage or compensation moneys payable in respect of any building or structure, shall, for the purposes of this Schedule, be deemed to be reduced by an amount equal to so much thereof, as, on a just apportionment, is attributable to assets representing expenditure other than expenditure in respect of which an allowance can be made under this Schedule.—Mr. Brittan.]

Brought up, read the First and Second time, and added to the Bill.

Orders of the Day — New Schedule

CAPITAL TRANSFER TAX: MAINTENANCE FUNDS

Property becoming comprised in maintenance funds

1.—(1) Subject to sub-paragraphs (2) and (3) below, tax shall not be charged under section 102 of this Act in respect of property which ceases to be relevant property on becoming property in respect of which a direction under section 87 of this Act then has effect.

(2) If the amount on which tax would be charged apart from sub-paragraph (1) above in respect of any property exceeds the value of the property immediately after it becomes property in respect of which the direction has effect (less the amount of any consideration for its transfer received by the trustees of the settlement in which it was comprised immediately before it ceased to be relevant property), that sub-paragraph shall riot apply but the amount on which tax is charged shall be equal to the excess.

(3) Sub-paragraph (1) above shall not apply in relation to any property if, at or before the time when it becomes property in respect of which the direction has effect, an interest under the settlement in which it was comprised immediately before it ceased to be relevant property is or has been acquired for a consideration in money or money's worth by the trustees of the settlement in which it becomes comprised on ceasing to he relevant property.

(4) For the purposes of sub-paragraph (3) above trustees shall be treated as acquiring an interest for a consideration in money or money's worth if they become entitled to the interest as a result of transactions which include a disposition for such consideration (whether to them or to another person) of that interest or of other property.

(5) Subject to sub-paragraphs (7) and (8) below, tax shall not be charged under section 102 of this Act in respect of property which ceases to be relevant property if within the permitted period an individual makes a transfer of value—

(a) which is exempt under section 89 of this Act, and
(b) the value transferred by which is attributable to that property.

(6) In sub-paragraph (5) above "the permitted period" means the period of thirty days beginning with the day on which the property ceases to be relevant property except in a case where it does so on the death of any person, and in such a case means the period of two years beginning with that day.

(7) Sub—paragraph (5) above shall not apply if the individual has acquired the property concerned for a consideration in money


or money's worth; and for the purposes of this sub-paragraph an individual shall be treated as acquiring any property for such consideration if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that or other property.

(8) If the amount on which tax would be charged apart from sub-paragraph (5) above in respect of any property exceeds the value of the property immediately after the transfer there referred to (less the amount of any consideration for its transfer received by the individual), that sub-paragraph shall not apply but the amount on which tax is charged shall be equal to the excess.

(9) The references in sub-paragraphs (2) and (8) above to the amount on which tax would be charged are references to the amount on which it would be charged apart from—

(a) paragraph (b) of section 102(2) of this Act, and
(b) Schedule 10 to the Finance Act 1976 (business property) and Schedule 14 to the Finance Act 1981 (agricultural property); and the references in those sub-paragraphs to the amount on which tax is charged are references to the amount on which it would be charged apart from that paragraph and those Schedules.

Property leaving maintenance funds: charge to tax

2.—(1) This paragraph applies to settled property which is held on trusts which comply with the requirements mentioned in subsection (3) of section 87 of this Act, and in respect of which a direction given under that section has effect.

(2) Subject to paragraphs 3 and 4 below, there shall be a charge to tax under this paragraph—

(a) where settled property ceases to be property to which this paragraph applies, otherwise than by virtue of an application mentioned in paragraph (a)(i) or (ii) of subsection (3) of section 87 of this Act or by devolving on any such body or charity as is mentioned in paragraph (a) (ii) of that subsection;
(b) in a case in which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by such an application) as a result of which the value of settled property to which this paragraph applies is less than it would be but for the disposition.

(3) Subsections (4), (5) and (9) of section 107 of this Act shall apply for the purposes of this paragraph as they apply for the purposes of that section (with the substitution of a reference to sub-paragraph (2)(b) above for the reference in section 107(4) to section 107(2)(b)).

(4) The rate at which tax is charged under this paragraph shall be determined in accordance with paragraphs 5 to 9 below.

(5) The devolution of property on a body or charity shall not be free from charge by virtue of sub-paragraph (2)a above if, at or before the time of devolution, an interest under the settlement in which the property was comprised immediately before the devolution is or has been acquired for a consideration in money or money's worth by that or another such body or charity; but for the purposes of this sub-paragraph any acquisition from another such body or charity shall be disregarded.

(6) For the purposes of sub-paragraph (5) above a body or charity shall be treated as acquiring an interest for a consideration in money or money's worth if it becomes entitled to the interest as a result of transactions which include a disposition for such consideration (whether to that body or charity or to another person) of that interest or of other property.

Property leaving maintenance funds: exceptions from charge

3.—(1) Subject to sub-paragraphs (3) and (4) below, tax shall not be charged under paragraph 2 above in respect of property which, within the permitted period after the occasion on which tax would be chargeable under that paragraph, becomes comprised in another settlement as a result of a transfer of value which is exempt under section 89 of this Act.

(2) In sub-paragraph (1) above "the limited period" means the period of thirty days except in a case where the occasion referred to is the death of the settlor, and in such a case means the period of two years.

(3) Sub-paragraph (1) above shall not apply to any property if the person who makes the transfer of value has acquired it for a consideration in money or money's worth; and for the purposes of this sub-paragraph a person shall be treated as acquiring any property for such consideration if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that or other property.

(4) If the amount on which tax would be charged apart from sub-paragraph (1) above in respect of any property exceeds the value of the property immediately after it becomes comprised in the other settlement (less the amount of any consideration for its transfer received by the person who makes the transfer of value), that sub-paragraph shall not apply but the amount on which tax is charged shall be equal to the excess.

(5) The reference in sub-paragraph (4) above to the amount on which tax would be charged is a reference to the amount on which it would be charged apart from—

(a) section I07(5)(b) of this Act (as applied by paragraph 2(3) above), and
(b) Schedule 10 to the Finance Act 1976 (business property) and Schedule 14 to the Finance Act 1981 (agricultural property);

and the reference in that sub-paragraph to the amount on which tax is charged is a reference to the amount on which it would be charged apart from section 107(5)(b) and those Schedules.

4.—(1) Subject to the following provisions of this paragraph, tax shall not be charged under paragraph 2 above in respect of property which ceases to be property to which that paragraph applies on becoming—

(a) property to which the settlor or his spouse is beneficially entitled, or
(b) property to which the settlor's widow or widower is beneficially entitled if the settlor has died in the two years preceding the time when it becomes such property.

(2) If the amount on which tax would be charged apart from sub-paragraph (1) above in respect of any property exceeds the value of the property, immediately after it becomes property of a description specified in paragraph (a) or (b) of that subparagraph (less the amount of any consideration for its transfer received by the trustees), that sub-paragraph shall not apply but the amount on which tax is charged shall be equal to the excess.

(3) The reference in sub-paragraph (2) above to the amount on which tax would be charged is a reference to the amount on which it would be charged apart from—

(a) section 107(5)(b) of this Act (as applied by paragraph 2(3) above), and
(b) Schedule 10 to the Finance Act 1976 (business property) and Schedule 14 to the Finance Act 1981 (agricultural property);

and the reference in sub-paragraph (2) above to the amount on which tax is charged is a reference to the amount on which it would be charged apart from section 107(5)(b) and those Schedules.

(4) Sub-paragraph (1) above shall not apply in relation to any property if, at or before the time when it becomes property of a description specified in paragraph (a) or (b) of that subparagraph, an interest under the settlement in which the property was comprised immediately before it ceased to be property to which paragraph 2 above applies is or has been acquired for a consideration in money or money's worth by the person who becomes beneficially entitled.

(5) For the purposes of sub-paragraprh (4) above a person shall be treated as acquiring an interest for a consideration in money or money's worth if he becomes entitled to the interest as a result of transactions which include a disposition for such consideration (whether to him or to another person) of that interest or of other property.

(6) Sub-paragraph (1) above shall not apply in respect of property if it was relevant property before it became (or last became) property to which paragraph 2 above applies and, by virtue of paragraph 1(1) or (5) above, tax was not chargeable (or, but for paragraph 1(2) or (8), would not have been chargeable) under section 102 of this Act in respect of it ceasing to be relevant property before becoming (or last becoming) property to which paragraph 2 above applies.

(7) Sub-paragraph (1) above shall not apply in respect of property if—

(a) before it last became property to which paragraph 2 above applies it was comprised in another settlement in which it was property to which that paragraph applies, and
(b) it ceased to be comprised in the other settlement and last became property to which that paragraph applies in circumstances such that by virtue of paragraph 3(1) above there was no charge (or, but for paragraph 3(4), there would have been no charge) to tax in respect of it.

(8) Sub-paragraph (1) above shall not apply unless the person who becomes beneficially entitled to the property is domiciled in the United Kingdom at the time when he becomes so entitled.

Property leaving maintenance funds: rates of charge

5.—(1) This paragraph applies where tax is chargeable under paragraph 2 above and—

(a) the property in respect of which the tax is chargeable was relevant property before it became (or last became) property to which that paragraph applies, and
(b) by virtue of paragraph 1(1) or (5) above tax was not chargeable (or, but for paragraph 1(2) or (8), would not have been chargeable) under section 102 of this Act in respect of it ceasing to be relevant property on or before becoming (or last becoming, property to which paragraph 2 above applies.

(2) Where this paragraph applies, the rate at which the tax is charged shall be the aggregate of the following percentages—

(a) 0·25 per cent. for each of the first forty complete successive quarters in the relevant period,
(b) 0·20 per cent. for each of the next forty,
(c) 0·15 per cent. for each of the next forty,
(d) 0·10 per cent. for each of the next forty, and
(e) 0·05 per cent. for each of the next forty.

(3) In sub-paragraph (2) above "the relevant period" means the period beginning with the latest of—

(a) the date of the last ten-year aniversary of the settlement in which the property was comprised before it ceased (or last ceased) to be relevant property,
(b) the day on which the property became (or last became) relevant property before it ceased (or last ceased) to be such property, and
(c) 13th March 1975,

and ending with the day before the event giving rise to the charge.

(4) Where the property in respect of which the tax is chargeable has at any time ceased to be and again become property to which paragraph 2 above applies in circumstances such that by virtue of paragraph 3(1) above there was no charge to tax in respect of it (or, but for paragraph 3(4) there would have been no charge), it shall for the purposes of this paragraph be treated as having been property to which paragraph 2 above applies throughout the period mentioned in paragraph 3(1).

6.—(1) This paragraph applies where tax is chargeable under paragraph 2 above and paragraph 5 above does not apply.

(2) Where this paragraph applies, the rate at which the tax is charged shall be the higher of—

(a) the first rate (as determined in accordance with paragraph 7 below), and
(b) the second rate (as determined in accordance with paragraph 8 below).

7.—(1) The first rate is the aggregate of the following percentages—

(a) 0·25 per cent. for each of the first forty complete successive quarters in the relevant period,
(b) 0·20 per cent. for each of the next forty,
(c) 0·15 per cent. for each of the next forty,
(d) 0· ·10 per cent. for each of the next forty, and
(e) 0·05 per cent. for each of the next forty.

(2) In sub-paragraph (1) above "the relevant period" means the period beginning with the day on which the property in respect of which the tax is chargeable became (or first become) property to which paragraph 2 above applies, and ending with the day before the event giving rise to the charge.

(3) For the purposes of sub-paragraph (2) above, any occasion on which property became property to which paragraph 2 above applies, and which occurred before an occasion of charge to tax under that paragraph in respect of the property, shall be disregarded.

(4) The reference in sub-paragraph (3) above to an occasion of charge to tax under paragraph 2 does not include a reference to—

(a) the occasion by reference to which the rate is being determined in accordance with this Schedule, or
(b) an occasion which would not be an occasion of charge but for paragraph 3(4) above.

8.—(1) If the senior is alive, the second rate is the effective rate at which tax would be charged, on the amount on which it is chargeable, under the appropriate Table if the amount were the value transferred by a chargeable transfer made by him on the occasion on which the tax becomes chargeable.

(2) If the senior is dead, the second rate is (subject to subparagraph (3) below) the effective rate at which tax would have been charged, on the amount on which it is chargeable, under the appropriate Table if the amount had been added to the value transferred on his death and had formed the highest part of it.

(3) If the settlor died before 13th March 1975, the second rate is the effective rate at which tax would have been charged, on the amount on which it is chargeable ("the chargeable amount"), under the appropriate Table if the settlor had died when the event occasioning the charge under paragraph 2 above occurred, the value transferred on his death had been equal to the amount on which estate duty was chargeable when he in fact died, and the chargeable amount had been, added to that value and had formed the highest part of it.

(4) Where, in the case of a settlement ("the current settlement"), tax is chargeable under paragraph 2 above in respect of property which—

(a) was previously comprised in another settlement, and
(b) ceased to be comprised in that settlement and became comprised in the current settlement in circumstances such that by virtue of paragraph 3(1) above there was no charge (or, but for paragraph 3(4), there would have been no charge) to tax in respect of it,

then, subject to sub-paragraph (5) below, references in subparagraphs (1) to (3) above to the senior shall be construed as references to the person who was the settlor in relation to the settlement mentioned in paragraph (a) above (or, if the Board so determine, the person who was the settlor in relation to the current settlement).

(5) Where, in the case of a settlement ("the current settlement"), tax is chargeable under paragraph 2 above in respect of property which—

(a) was previously comprised at different times in other settlements ("the previous settlements"), and
(b) ceased to be comprised in each of them, and became comprised in another of them or in the current settlement, in circumstances such that by virtue of paragraph 3(1) above there was no charge (or, but for paragraph 3(4), there would have been no charge) to tax in respect of it,

references in sub-paragraphs (1) to (3) above to the settlor shall be construed as references to the person who was the senior in relation to the previous settlement in which the property was first comprised (or, if the Board so determine, any person selected by them who was the settlor in relation to any of the other previous settlements or the current settlement).

(6) Sub-paragraph (7) below shall apply if—

(a) in the period of ten years preceding a charge under paragraph 2 above (the "current charge"), there has been another charge under that paragraph where tax was charged at the second rate, and
(b) the person who is the settlor for the purposes of the current charge is the settlor for the purposes of the other charge (whether or not the settlements are the same and, if the settlor is dead, whether or not he has died since the other charge);

and in sub-paragraph (7) below the other charge is refened to as the "previous charge".

(7) Where this sub-paragraph applies, the amount on which tax was charged on the previous charge (or, if there have been more than one, the aggregate of the amounts on which tax was charged on each)—

(a) shall, for the purposes of calculating the rate of the current charge under sub-paragraph (1) above, be taken to be the value transferred by a chargeable transfer made by the settlor immediately before the occasion of the current charge, and
(b) shall, for the purposes of calculating the rate of the current charge under sub-paragraph (2) or (3) above, be taken to increase the value there mentioned by an amount equal to that amount (or aggregate).

(8) References in sub-paragraphs (1) to (3) above to the effective rate are to the rate found by expressing the tax chargeable as a percentage of the amount on which it is charged.

(9) For the purposes of sub-paragraph (1) above the appropriate Table is t he second Table in section 37 of the Finance Act 1975, and for the purposes of sub-paragraphs (2) and (3) above it is (if the settlement was made on death) the first Table in that section and (if not) the second.

9. Where property is, by virtue of section 88(5) of this Act, treated as property in respect of which a direction has been given under section 87 of this Act, it shall for the purposes of paragraphs 5 to 8 above be treated as having become property to which paragraph 2 above applies when the transfer of value mentioned in section 88(5) was made.—[Mr. Brittan.]

Brought up, read the First and Second time, and added to the Bill.

Orders of the Day — Schedule 20

REPEALS

Amendment made: No. 155, in page 222, line 25, column 3, at end insert 'paragraph 16(5);'.—[Mr. Brittan.]

Mr. Brittan: I beg to move amendment No. 156, in page 223, line 42, leave out 'paragraph 3' and insert 'paragraphs 3 and 4A'.

Mr. Deputy Speaker: With this we may take Government amendment No. 157.

Mr. Brittan: These are drafting amendments designed to bring together all the references to the material to be repealed in schedule 15 to the Finance Act 1980.

Amendment agreed to.

Amendments made: No. 157, in page 223, leave out line 48.

No. 186, in page 224, line 11, at end insert—
'1A. The repeal of paragraph 12(1) and (2) of Schedule 5 to the Finance Act 1975 has effect as from 1st January 1982.'.—[Mr. Brittan.]

Mr. Brittan: I beg to move, That the Bill be now read the Third time.
I understand that it would be for the convenience of the House if the right hon. Member for Stepney and Poplar (Mr. Shore) were to say a few words on this matter, and I similarly propose to do no more than that.
Four months ago my right hon. Friend the Chancellor of the Exchequer presented his fourth Budget. The Bill represents the enactment of that Budget. The principal purpose of that Budget was to provide a financial framework which would enable British industry to recover, on the basis of the reduction in interest rates.
On Second Reading I mentioned that the banks and building societies had announced their latest reductions in lending rates after the Budget. That was no accident. They wanted to see how the markets would take the Budget, and the markets reacted in the way that we have seen. There have since been further movements in the markets, reflected by a further fall in interest rates. It is by providing a responsible framework that we see reductions in interest rates.
The Bill provides a package of measures designed to help and encourage both new and existing small businesses. I do not propose to set them out in detail. The measures are not designed to provide a major reflationary package, which would lead to the renewal of inflation. They are individually and collectively designed to assist British industry to recover. It is in that spirit that I commend the Bill to the House.

Mr. Shore: On the occasion, keenly awaited, of the Third Reading of this important Bill,, we have come not to praise the Bill but to bury it. We voted against the

Second Reading of what we consider to be an ugly Bill because of the gross inequalities reflected in its pages. Earlier today we drew attention to the appallingly bad treatment of unemployed people and their benefits and the great generosity accorded to those who pay capital gains and capital transfer tax.
The ugliness of the Bill is reflected in the fact that it is part of an economic strategy to keep 3 million of our fellow citizens unemployed. We are anxious to dispose of the Bill. We tried to improve it in Committee, and I pay tribute to the efforts of my Treasury team and the members of the Committee who assisted. We have reached the Third Reading. The Bill has not been improved. I invite my friends to vote against it.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 274, Noes 183.

Division No. 274]
[1.37 am


AYES


Aitken, Jonathan
Crouch, David


Alison, Rt Hon Michael
Dorrell, Stephen


Ancram, Michael
Douglas-Hamilton, Lord J.


Arnold, Tom
Dover, Denshore


Aspinwall, Jack
du Cann, Rt Hon Edward


Atkins, Robert (Preston N)
Dunn, Robert (Dartford)


Atkinson, David (B'm'th,E)
Durant, Tony


Baker, Nicholas (N Dorset)
Eden, Rt Hon Sir John


Banks, Robert
Eggar, Tim


Beaumont-Dark, Anthony
Elliott, Sir William


Bendall, Vivian
Eyre, Reginald


Bennett, Sir Frederic (T'bay)
Fairbairn, Nicholas


Benyon, Thomas (A'don)
Fairgrieve, Sir Russell


Benyon, W. (Buckingham)
Faith, Mrs Sheila


Best, Keith
Farr, John


Bevan, David Gilroy
Fell, Sir Anthony


Biffen, Rt Hon John
Fenner, Mrs Peggy


Biggs-Davison, Sir John
Finsberg, Geoffrey


Blackburn, John
Fisher, Sir Nigel


Blaker, Peter
Fletcher, A. (Ed'nb'gh N)


Body, Richard
Fletcher-Cooke, Sir Charles


Bonsor, Sir Nicholas
Fookes, Miss Janet


Boscawen, Hon Robert
Forman, Nigel


Bottomley, Peter (W'wich W)
Fowler, Rt Hon Norman


Bowden, Andrew
Fox, Marcus


Boyson, Dr Rhodes
Fraser, Peter (South Angus)


Braine, Sir Bernard
Gardner, Edward (S Fylde)


Bright, Graham
Garel-Jones, Tristan


Brinton, Tim
Glyn, Dr Alan


Brittan, Rt. Hon. Leon
Goodhart, Sir Philip


Brooke, Hon Peter
Goodhew, Sir Victor


Brotherton, Michael
Goodlad, Alastair


Brown, Michael(Brigg &amp; Sc'n)
Gorst, John


Bruce-Gardyne, John
Gow, Ian


Bryan, Sir Paul
Grant, Anthony (Harrow C)


Buchanan-Smith, Rt. Hon. A.
Gray, Hamish


Buck, Antony
Greenway, Harry


Budgen, Nick
Griffiths, E.(B'y St. Edm'ds)


Bulmer, Esmond
Griffiths, Peter Portsm'th N)


Burden, Sir Frederick
Grylls, Michael


Butcher, John
Gummer, John Selwyn


Cadbury, Jocelyn
Hamilton, Hon A.


Carlisle, John (Luton West)
Hamilton, Michael (Salisbury)


Carlisle, Kenneth (Lincoln)
Hampson, Dr Keith


Carlisle, Rt Hon M. (R'c'n)
Hannam, John


Chalker, Mrs. Lynda
Haselhurst, Alan


Channon, Rt. Hon. Paul
Hastings, Stephen


Chapman, Sydney
Havers, Rt Hon Sir Michael


Churchill, W. S.
Hawkins, Sir Paul


Clark, Hon A. (Plym'th, S'n)
Hayhoe, Barney


Clark, Sir W. (Croydon S)
Heddle, John


Clarke, Kenneth (Rushcliffe)
Henderson, Barry


Colvin, Michael
Heseltine, Rt Hon Michael


Cope, John
Hicks, Robert


Corrie, John
Higgins, Rt Hon Terence L.


Costain, Sir Albert
Hill, James


Cranborne, Viscount
Hogg, Hon Douglas (Gr'th'm)






Holland, Philip (Carlton)
Porter, Barry


Hooson, Tom
Price, Sir David (Eastleigh)


Hordern, Peter
Prior, Rt Hon James


Howe, Rt Hon Sir Geoffrey
Proctor, K. Harvey


Howell, Ralph (N Norfolk)
Raison, Rt Hon Timothy


Hunt, David (Wirral)
Rathbone, Tim


Hunt, John (Ravensbourne)
Rees, Peter (Dover and Deal)


Irvine, Bryant Godman
Rees-Davies, W. R.


Jessel, Toby
Renton, Tim


Johnson Smith, Sir Geoffrey
Rhodes James, Robert


Jopling, Rt Hon Michael
Rhys Williams, Sir Brandon


Joseph, Rt Hon Sir Keith
Ridley, Hon Nicholas


Kellett-Bowman, Mrs Elaine
Ridsdale, Sir Julian


Kershaw, Sir Anthony
Rifkind, Malcolm


Kimball, Sir Marcus
Rippon, Rt Hon Geoffrey


King, Rt Hon Tom
Roberts, M. (Cardiff NW)


Knight, Mrs Jill
Roberts, Wyn (Conway)


Knox, David
Rossi, Hugh


Lang, Ian
Rost, Peter


Lawrence, Ivan
Rumbold, Mrs A. C. R.


Lee, John
Sainsbury, Hon Timothy


Lennox-Boyd, Hon Mark
St. John-Stevas, Rt Hon N.


Lester, Jim (Beeston)
Scott, Nicholas


Lewis, Kenneth (Rutland)
Shaw, Giles (Pudsey)


Lloyd, Peter (Fareham)
Shelton, William (Streatham)


Loveridge, John
Shepherd, Colin (Hereford)


Luce, Richard
Shepherd, Richard


Lyell, Nicholas
Shersby, Michael


Macfarlane, Neil
Silvester, Fred


MacGregor, John
Sims, Roger


MacKay, John (Argyll)
Skeet, T. H. H.


Macmillan, Rt Hon M.
Smith, Dudley


McNair-Wilson, M. (N'bury)
Smith, Tim (Beaconsfield)


McNair-Wilson, P. (New F'st)
Speed, Keith


Madel, David
Speller, Tony


Major, John
Spicer, Jim (West Dorset)


Marland, Paul
Spicer, Michael (S Worcs)


Marten, Rt Hon Neil
Sproat, Iain


Maude, Rt Hon Sir Angus
Squire, Robin


Mawby, Ray
Stainton, Keith


Mawhinney, Dr Brian
Stanbrook, Ivor


Maxwell-Hyslop, Robin
Stanley, John


Mayhew, Patrick
Steen, Anthony


Mellor, David
Stevens, Martin


Meyer, Sir Anthony
Stewart, A. (E Renfrewshire)


Miller, Hal (B'grove)
Stewart, Ian (Hitchin)


Mills, Iain (Meriden)
Stokes, John


Mills, Sir Peter (West Devon)
Stradling Thomas, J.


Miscampbell, Norman
Tapsell, Peter


Mitchell, David (Basingstoke)
Taylor, Teddy (S'end E)


Moate, Roger
Temple-Morris, Peter


Monro, Sir Hector
Thomas, Rt Hon Peter


Montgomery, Fergus
Thompson, Donald


Moore, John
Thorne, Neil (Ilford South)


Morris, M. (N'hampton S)
Thornton, Malcolm


Morrison, Hon C. (Devizes)
Townend, John (Bridlington)


Morrison, Hon P. (Chester)
Townsend, Cyril D, (B'heath)


Mudd, David
Trippier, David


Murphy, Christopher
Trotter, Neville


Myles, David
van Straubenzee, Sir W.


Neale, Gerrard
Viggers, Peter


Needham, Richard
Waddington, David


Nelson, Anthony
Wakeham, John


Neubert, Michael
Waldegrave, Hon William


Newton, Tony
Walker, B. (Perth)


Normanton, Tom
Waller, Gary


Onslow, Cranley
Walters, Dennis


Oppenheim, Rt Hon Mrs S.
Ward, John


Osborn, John
Watson, John


Page, John (Harrow, West)
Wells, Bowen


Page, Richard (SW Herts)
Wells, John (Maidstone)


Parkinson, Rt Hon Cecil
Wheeler, John


Parris, Matthew
Whitney, Raymond


Patten, John (Oxford)
Wickenden, Keith


Pattie, Geoffrey
Wiggin, Jerry


Pawsey, James
Wilkinson, John


Percival, Sir Ian
Williams, D.(Montgomery)


Pink, R. Bonner
Winterton, Nicholas


Pollock, Alexander
Wolfson, Mark





Young, Sir George (Acton)
Tellers for the Ayes:


Younger, Rt Hon George
Mr. Anthony Berry and



Mr. Carol Mather.


NOES


Adams, Allen
Harrison, Rt Hon Walter


Allaun, Frank
Hart, Rt Hon Dame Judith


Anderson, Donald
Hattersley, Rt Hon Roy


Archer, Rt Hon Peter
Haynes, Frank


Ashley, Rt Hon Jack
Hogg, N. (E Dunb't'nshire)


Ashton, Joe
Holland, S. (L'b'th, Vauxh'll)


Atkinson, N. (H'gey,)
Homewood, William


Bagier, Gordon A. T.
Hooley, Frank


Barnett, Guy (Greenwich)
Howell, Rt Hon D.


Barnett, Rt Hon Joel (H'wd)
Hoyle, Douglas


Benn, Rt Hon Tony
Huckfield, Les


Booth, Rt Hon Albert
Hughes, Mark (Durham)


Boothroyd, Miss Betty
Hughes, Robert (Aberdeen N)


Bray, Dr Jeremy
Janner, Hon Greville


Brown, Hugh D. (Provan)
John, Brynmor


Brown, Ron (E'burgh, Leith)
Jones, Rt Hon Alec (Rh'dda)


Buchan, Norman
Jones, Barry (East Flint)


Callaghan, Jim (Midd't'n &amp; P)
Kaufman, Rt Hon Gerald


Campbell, Ian
Kerr, Russell


Campbell-Savours, Dale
Kilroy-Silk, Robert


Canavan, Dennis
Lamond, James


Cant, R. B.
Leadbitter, Ted


Carmichael, Neil
Leighton, Ronald


Carter-Jones, Lewis
Lewis, Ron (Carlisle)


Clark, Dr David (S Shields)
Litherland, Robert


Clarke, Thomas C'b'dge,
Lofthouse, Geoffrey


A'drie
McCartney, Hugh


Cocks, Rt Hon M. (B'stol S)
McDonald, Dr Oonagh


Cohen, Stanley
McElhone, Frank


Coleman, Donald
McGuire, Michael (Ince)


Concannon, Rt Hon J. D.
McKay, Allen (Penistone)


Cook, Robin F.
McKelvey, William


Cowans, Harry
MacKenzie, Rt Hon Gregor


Craigen, J. M. (G'gow, M'hill)
McNamara, Kevin


Cryer, Bob
McTaggart, Robert


Cunliffe, Lawrence
McWilliam, John


Cunningham, Dr J. (W'h'n)
Marks, Kenneth


Davidson, Arthur
Marshall, D (G'gow S'ton)


Davies, Rt Hon Denzil (L'lli)
Marshall, Dr Edmund (Goole)


Davis, Clinton (Hackney C)
Marshall, Jim (Leicester S)


Davis, Terry (B'ham, Stechf'd)
Martin, M (G'gow S'burn)


Deakins, Eric
Maxton, John


Dean, Joseph (Leeds West)
Maynard, Miss Joan


Dewar, Donald
Meacher, Michael


Dixon, Donald
Millan, Rt Hon Bruce


Dobson, Frank
Miller, Dr M. S. (E Kilbride)


Dormand, Jack
Mitchell, Austin (Grimsby)


Douglas, Dick
Morris, Rt Hon A. (W'shawe)


Dubs, Alfred
Morris, Rt Hon C. (O'shaw)


Duffy, A. E. P.
Moyle, Rt Hon Roland


Dunnett, Jack
Newens, Stanley


Dunwoody, Hon Mrs G.
O'Neill, Martin


Eadie, Alex
Palmer, Arthur


Eastham, Ken
Park, George


Ellis, R. (NE D'bysh're)
Parry, Robert


English, Michael
Pavitt, Laurie


Ennals, Rt Hon David
Pendry, Tom


Evans, Ioan (Aberdare)
Powell, Raymond (Ogmore)


Evans, John (Newton)
Prescott, John


Ewing, Harry
Price, C. (Lewisham W)


Faulds, Andrew
Race, Reg


Field, Frank
Radice, Giles


Flannery, Martin
Rees, Rt Hon M (Leeds S)


Fletcher, Ted (Darlington)
Richardson, Jo


Ford, Ben
Roberts, Ernest (Hackney N)


Forrester, John
Roberts, Gwilym (Cannock)


Foulkes, George
Robertson, George


Fraser, J. (Lamb'th, N'w'd)
Robinson, G. (Coventry NW)


Freeson, Rt Hon Reginald
Rooker, J. W.


Garrett, John (Norwich S)
Ross, Ernest (Dundee West)


Garrett, W. E. (Wallsend)
Rowlands, Ted


Graham, Ted
Sever, John


Hamilton, James (Bothwell)
Sheerman, Barry


Hamilton, W. W. (C'tral Fife)
Sheldon, Rt Hon R.


Hardy, Peter
Shore, Rt Hon Peter






Short, Mrs Renée
Walker, Rt Hon H. (D'caster)


Silkin, Rt Hon J. (Deptford)
Welsh, Michael


Silverman, Julius
White, Frank R.


Skinner, Dennis
White, J. (G'gow Pollok)


Soley, Clive
Whitehead, Phillip


Spearing, Nigel
Whitlock, William


Spriggs, Leslie
Williams, Rt Hon A. (S'sea W)


Stoddart, David
Wilson, Gordon (Dundee E)


Stott, Roger
Wilson, William (C'try SE)


Strang, Gavin
Winnick, David


Straw, Jack
Woodall, Alec


Summerskill, Hon Dr Shirley
Woolmer, Kenneth


Thorne, Stan (Preston South)
Wrigglesworth, Ian


Tilley, John
Wright, Sheila


Tinn, James
Young, David (Bolton E)


Torney, Tom



Urwin, Rt Hon Tom
Tellers for the Noes:


Varley, Rt Hon Eric G.
Mr. Derek Foster and


Wainwright, E. (Dearne V)
Mr. George Morton

Question accordingly agreed to.

Bill read the Third time, and passed.

Orders of the Day — FOREIGN AFFAIRS

Ordered,
That Mr. Bowen Wells be discharged from the Foreign Affairs Committee and Mr. Jim Lester be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

Orders of the Day — SOCIAL SERVICES

Ordered,
That Sir Brandon Rhys Williams be discharged from the Social Services Committee and Mrs. Angela Rumbold be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

Orders of the Day — TREASURY AND CIVIL SERVICE

Ordered,
That Mr. Tim Eggar be discharged from the Treasury and Civil Service Committee and Mr. John Browne be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

Orders of the Day — Growth Area (Mid-Sussex)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. David Hunt.]

Mr. Tim Renton: I wish to call the attention of the House to the urgent need to remove the growth area label from Mid-Sussex. That label stems from the strategic plan for the South-East that was approved by the Government in 1971.
When I became the parliamentary candidate for Mid-Sussex in 1972, one of my first interests stemmed from the certainty that the growth area label was a mistake. In the light of all the development that has taken place in the past decade, I am even more convinced than I was 10 years ago that it is a mistake.
I apologise for bringing this urgent matter to the attention of my hon. Friend the Under-Secretary of State for the Environment at this late hour. However, I am delighted to see two neighbourly colleagues in their places, my hon. Friends the Members for East Grinstead (Sir G. Johnson Smith) and for Horsham and Crawley (Mr. Hordern). Also in his place is my hon. Friend the Member of Eastbourne (Mr. Gow). Their presence emphasises the fact that we in Sussex feel about this issue.
I appreciate that it is thoroughly unusual to ask for a growth area label to be removed from a part of the country. We in Sussex have, like others, suffered from increasing unemployment, but in West Sussex the unemployment figures are only about 7 per cent. That is much lower than the figure in other areas. We have had so much house-building in the past 20 years that we now need a breathing space in which we can as a community absorb the changes and provide the necessary facilities for the many families and firms that are already in our part of the country. We must look to local firms to absorb school leavers and the unemployed with their natural growth rather than have the Government encourage other major firms to come into the area from elsewhere in Britain.
If you were fortunate enough, Mr. Deputy Speaker, to drive down the M23 on your way to Brighton, you would, when the M23 ceases, drive along the A23 for nearly 20 miles through my constituency. You would go first through the beautiful country of the High Weald, which is now an area of outstanding natural beauty. On your left would be the garden of Nymans, a National Trust property. You would then pass the Ardingly reservoir. On your left would be Balcombe viaduct. After Haywards Heath you would see the South Downs. In that lovely countryside you might wonder where all the growth is to be found about which I am speaking.
The drive down the A23 through beautiful countryside would conceal the incredible rate of growth that we have had in Mid-Sussex in recent years. Between 1971 and 1981 the population of the United Kingdom increased by 0·5 per cent. The population of Mid-Sussex increases by 18·5 per cent. Burgess Hill has been the fastest growing town in West Sussex, growing from 7,000 people in 1951 to about 22,000 souls, and still rising in 1982.
In many ways the growth is not surprising. To the north of us we have Crawley, a new town, to which many of my constituents travel for their daily work. Others go south to Brighton. Again, to the north there is Gatwick airport, which is growing rapidly. There is the possibility of a second terminus there, about which many of us have


serious worries and reservations. To the south there are the Channel ports, including Newhaven. When trains run, which is not happening at present, we have a very good train network to London which is used by many commuters.
It is not surprising that with all these natural facilities we should have had a substantial rate of growth. However, what concerns my constituents, myself and the Mid-Sussex district council, which thoroughly supports the need to remove the growth area label, is not merely the innate growth of populations and firms that are already in the South-East but the growth that has come to us from outside—the new firms, with the attendant families, which have moved into our area.
In Mid-Sussex, we already see a great shortage of land for industrial development. It was announced by the council last weekend that it would release some 10 acres for new industrial development in Burgess Hill, and the view was that it would be snapped up straight away. In Mid-Sussex, we do not see anything like the number of workshops and the factory space for small companies which are starting that we should like to see.
The West Sussex structure plan has favoured continued new building in Mid-Sussex. The Mid-Sussex district council would much prefer stretching the present land allocation for house building from 1991–1996. But the county council suggests that another 9,000 dwellings should be built between 1991 and 1996 in Central Sussex, of which at least 5,000 would be in Mid-Sussex.
A recent survey showed that only 28 per cent. of new houses in Mid-Sussex were being bought by local residents. All the others were going to newcomers to the area. This stresses the point that so much of the building and development that has gone on is not for firms and families already with us but for others attracted into the area.
It is on that basis that I ask for the growth area label to be removed. It is obvious that this tremendous pace of house building has not been matched by an equivalent development of social and community facilities. We have not had the right amount of development in terms of schools, health care, recreation or open space. In that context, I quote from a recent report that was attached to the Burgess Hill local plan. It was prepared by the area office of the West Sussex county council social services department. It says that two new estates,
Laylands Park and Folders Lane (Burgess Hill) totally lack facilities and minor research done with developers in response to community generated needs highlighted that there are no community resources planned. The requests from this area were for facilities to develop a Mother and Young Group, a pre-School playgroup, Brownies, Guides, Scouts and Cub Scouts. These needs are directly related to the needs of the range of families moving into the area. During discussions we became aware of the tremendous isolation and loneliness that many of the young mothers were experiencing … Feedback from social workers at the Child Guidance Clinic, Cuckfield Hospital and area office showed that this problem was increasing on the new estates".
Recently, the West Sussex county council decided to sell three acres of open space at Marie Place in Burgess Hill. The idea was that the land would be sold and used for house building. That decision caused an outburst of local fury. Those three acres are not very well located in the town, but they are some of the small amount of recreational space available in the centre of the town. The news that the land was to be sold for house building provoked an indignant reaction from my constituents.
It has a very bad effect on a community when families move in and spend a great deal of money on their new houses, having taken on mortgages which are often too large for their budgets, only to find that there is no village atmosphere, no village hall and no community building. It is from circumstances of that kind that the family problems that I have descried arise.
In Mid-Sussex, we have had a continuing fight on our hands to keep the precious green gaps which separate villages and tow as—which separate Balcombe from Haywards Heath, Haywards Heath from Hurstpierpoint, and Hurstpierpoint from Keymer and Hassocks. If growth continued over the next decade at the pace at which it has proceeded in the past decade, all those green gaps would disappear, one by one.
It is easy for the Department of the Environment to say that with the development of housing we should be spending more on community facilities, new playing fields and so on, but my Conservative-controlled district council has always levied rates prudently. It currently levies a rate of only 14·3p and all that goes on the basic services, such as refuse collection, which automatically expand as houses are built and new families move in. There are no great sums available for capital projects, particularly as the council has tried to hold down rates in cash terms.
The Department cannot have its financial caution cake, which I respect, and eat that cake by telling a prudent council that it should spend more on recreational and leisure facilities.
I must ask my hon. Friend the Under-Secretary of State for the Environment immediately to review the regional strategy for our area. Such a review is overdue and essential and it is also clear that West Sussex county council should be asked to be much more flexible over the county structure plan, so that not all the development that takes place in West Sussex is dumped in our part of the county.
Surrey must take its share of development and, as Gatwick airport is developed, the green belt in Surrey should not be sacrosanct.
Unless we have a review of the regional strategy and the growth area label is removed, we shall see within a generation urban sprawl all the way from Crawley to Brighton. The mavellous countryside that I mentioned earlier will be lost. We need a breathing space to accommodate what is already there.
I often think of my part of Sussex as potentially the Silicon Valley of Western Europe. The many high technology companies there are expanding and exporting well to Western Europe. But we cannot have chips—even silicon chips—with everything, and unless we have severe restraint now, the famous Sussex by the sea will become Sussex under the sea—submerged by people, concrete, airports and factories. I do not believe that that is what the people in Sussex want.

Sir Geoffrey Johnson Smith: I congratulate my hon. Friend the Member for Mid-Sussex (Mr. Renton) on raising this important matter and I am grateful to him for allowing me to take part in the debate.
My constituency in East Sussex adjoins that of my hon. Friend, and his comments about Mid-Sussex apply with equal force to some parts of East Sussex. For example, one of my towns also rose in great wrath when it was suggested that it could accommodate many thousand more homes


without the proper schools and with no hope of the proper social infrastructure being allowed. There are also totally inadequate road and public transport systems.
All in all, it is ludicrous to think that the area should be despoiled. We have a natural growth which will make it increasingly difficult for us to house our own people, but I should like to look at the issue from the view point of land use and farmers.
Hundreds of thousands of acres of virgin farm land are developed for industry and housing, while hundreds of thousands of acres of land in our big cities is not properly used. Much of it is derelict and it is ripe for such development. I do not want to talk about green belts being despoiled but I journey through south London and I see the land there which is not being properly used. If we want to provide jobs for the people of inner and outer London, who really need the jobs, that is where much of the development should take place rather then turning some of the beautiful countryside which is used for valuable farming purposes into a new industrial slum stretching from London to the south coast. We should not have our countryside murdered. That is why I support my hon. Friend.

Mr. Peter Hordern: I am grateful to my hon. Friend the Member for Mid-Sussex (Mr. Renton) for raising this important matter. The Cuckfield and Crawley area has been designated a growth area for some years in the original regional structure plan. Should not the whole concept of the growth area now be reviewed? Not only was it started many years ago but circumstances have changed enormously since then, in the sense that the population of London is fast dwindling and the growth in our area should no longer be appropriate when one thinks that the Docklands board and other development area authorities are trying to attract people back to London. The whole concept of the growth area should be reviewed. I fully support what my hon. Friend has said about that.
I echo what my hon. Friend has said about the importance of preserving the character of our countryside, in his area and in mine. He talked about the gaps between the towns and villages and how necessary it is to preserve them. Perhaps the most important is that narrow gap that separates Crawley new town and Horsham, which must be preserved at all costs.
I have only one slight difference with my hon. Friend. If the county council is to review its structure plan in relation to the growth plan, that has implications for Horsham council and other councils throughout West Sussex. The Cuckfield and Crawley area having been designated a growth area—Crawley is part of my constituency—I do not believe that growth should be foisted on to other equally desirable parts of West Sussex. But much the most important part of our care, with which my hon. Friends the Members for Mid-Sussex and East Grinstead (Sir G. Johnson Smith) agree, is that the regional structure plan should be reviewed once more.

Mr. Ian Gow: There can rarely have been an Adjournment debate in which a trio of such distinguished Sussex Members have participated.

Mr. Hordern: A quartet.

Mr. Gow: No. My hon. Friend should not place me in the category of distinguished Members from Sussex. I support most strongly the speech of my hon. Friend the Member for Mid-Sussex (Mr. Renton). It is rather bizarre that my hon. Friend the Under-Secretary of State for the Environment should represent a Yorkshire constituency, but I am sure that my three hon. Friends will join me in inviting him to visit us in Sussex.

Mr. Hordern: Soon.

Mr. Gow: My hon. Friend the Member for Horsham and Crawley is right when he says that it should be soon, by which he means before the end of this month.
We should like the Under-Secretary to visit our constituencies, when he would be able to see for himself the truth of what my hon. Friend the Member for Mid-Sussex (Mr. Renton) described. All over our county we see that from which we have suffered for so long. We see those involved in central Government seeking to impose their presumed superior wisdom over those who live, move and have their being in the constituencies. I am sure that when the Under-Secretary of State replies he will acknowledge the truth, that the man in Whitehall does not always know best.

The Under-Secretary of State for the Environment (Mr. Giles Shaw): I rise fearful of the fact that behind me there are four Horsemen fearing the Apocalypse of uncontrolled growth in the great and good county of Sussex. I hope, however, that what I have to say will give some comfort to my hon. Friends in the line of reasoning that they have so eloquently and jointly presented. In the relatively short time available, I should like to deal with the issues raised by my hon. Friend the Member for Mid-Sussex (Mr. Renton).
My hon. Friend will no doubt remember that the Government's views on the regional strategies were set out in a letter from my right hon. Friend the Secretary of State to Lord Nugent in August 1980. That letter set out strategic guidance. The letter is substantially an update of the original regional strategy, to which my hon. Friend referred, laid by a previous Administration some years ago. It is important for my hon. Friends to understand that the regional strategy set some years ago is not of itself the route by which all future planning should flow.
My hon. Friend the Member for Shipley (Mr. Fox), when he was Under-Secretary of State, answered a question from my hon. Friend the Member for Melton (Mr. Latham) saying:
We are not bound by the regional strategies of previous Governments but we shall take note of them before approving structure plans and we shall in due course arrange for the provision of whatever new or amended regional guidance may be needed as a framework for structure planning."—[Official Report, 11 July 1979; Vol. 970, c. 230.]
That view still holds. The position of Sussex has been largely determined by the strategic regional planning of a previous Administration. My right hon. Friend's letter of 7 August 1980 made it clear that he supported the principle of making provision in structure plans for concentrating substantial new developments in identified locations. This principle has been carried through in the approval of some growth areas in the existing structure plans. I take up the point made forcibly by my hon. Friend the Member for


Horsham and Crawley (Mr. Hordern) and also by my hon. Friend the Member for East Grinstead (Sir. G. Johnson Smith) about the role of London being so crucial in the development pressures in counties such as Sussex.
In the same letter my right hon. Friend said:
New and expanding town schemes have been scaled down or brought to an end. More specifically, London is no longer regarded as a source of population and jobs for other areas. Favourable conditions must be created in London so that private individuals and firms will once more choose to live and invest there.
That has been followed by the creation of the Docklands urban development corporation in London, the enterprise zone, the Land Register and all the other measures. We are determined to recycle urban land and to end the automatic assumption that green field site development is the only way to cater for growth.
In the letter of August 1980, my right hon. Friend stated:
This Government firmly supports rural conservation, although the degree of restraint must depend on local circumstances. There should continue to be the strongest restraint on development in the Metropolitan Green Belt … Structure plans also set out other approved policies to protect and enhance the region's countryside.
The Government share the commitments that my hon. Friends the Members for Mid-Sussex, for East Grinstead, for Horsham and Crawley and for Eastbourne (Mr. Gow) have so eloquently expressed.
I should like to deal with three aspects raised by my hon. Friend the Member for Mid-Sussex which were also contained in the document he supplied to my Department from the Mid-Sussex district council. I take up the point that the regional strategy is out of date and needs reviewing as a matter of urgency. The Government are not bound by the regional strategies of their predecessors. Nor do we believe regional strategies to be an essential part of the planning framework though, from time to time, in some regions, strategic guidance may be called for. The status of the regional strategy is now that of useful historic source material which, as time goes by, will become increasingly out of date at the local level.
The Government's current regional strategic guidance is contained in my right hon. Friend's letter to Lord Nugent. It endorses the concept of growth areas but it does not presuppose the designation of any particular area as a growth area. The need to withdraw Burgess Hill's status as a growth area in the strategy does not, therefore, arise.
My right hon. Friend the Secretary of State's consideration so far of the appropriate level of growth in the Crawley-Burgess Hill area was reflected in his approval of the West Sussex and Surrey structure plans. Further growth may need to be catered for to continue to meet local needs, including the possible consequences of a second terminal at Gatwick, if it is permitted. Whether Crawley or Burgess Hill should remain a growth area in the structure plan—and at what level—is therefore a matter for debate and discussion in the processes leading to the approval of any future alterations to the West Sussex structure plan.
My hon. Friend referred to the possibility of the Surrey towns, particularly Horley, taking their full share of growth. The Surrey structure plan, approved in April 1980, extended the metropolitan green belt over most of Surrey and, though allowing for growth in the towns within the green belt to meet local needs, applied a general policy of restraint. We attach, of course, great importance to the continued protection of the green belt around

London. I am sure that all my hon. Friends will endorse that. The green belt did not include Horley and my right hon. Friend, when approving the structure plan, indicated that there was some scope for growth around Horley, and that part of Surrey within the Crawley-Burgess Hill area, but it should be limited and should be on a scale appropriate to satisfy locally generated demand.
Clearly this area will have to make a contribution to meeting future housing demand arising from Crawley-Gatwick, to which it is so closely associated. When West Sussex county council reviews its structure plan on a matter such as this it will necessarily consult its neighbouring planning authorities, including Surrey county council, and this will be the appropriate forum for it to discuss the point that my hon. Friends have made about the relationship between Sussex growth and Surrey taking its share.
My hon. Friend the Member for Mid-Sussex also referred to the sense of injustice that his constituents feel arising from the fact that a disproportionate amount of growth should be directed towards Mid-Sussex and that this will cause damage to the lovely towns of that area and its beautiful countryside. I well understand those anxieties.
Any proposals to change the policies on the scale and location of development included in the West Sussex structure plan will, of course, need to be approved by my right hon. Friend before they become part of the statutory development plan. My hon. Friend will appreciate that my right hon. Friend the Secretary of State is obviously not bound in any way by the discussion document that I understand has been prepared by the West Sussex county council.
Before any such proposals are approved they will need to go through the statutory procedures, including public consultation. That process ensures that all views, such as those expressed tonight, will be taken into account. I emphasise that it will be open to the Mid-Sussex district council to bring forward any evidence it wishes at the regional, sub-regional or local level at the examination in public, as will be the case for the county council.
In answer to the points made by my hon. Friend, the Government are of course concerned that adequate supplies of housing land are made available in suitable locations. It will no doubt be necessary for further provision to be made in West Sussex. But I should like to reassure my hon. Friend that we have no preconceived ideas about the scale of this or its location. We are conscious of, and indeed appreciate, the effort that has been made by Mid-Sussex district council and the important contribution that it has made, not only to meeting the needs of its own area but to meeting the needs of other parts of the county and indeed the region.
I hope that I have been able to reassure my hon. Friends tonight that when my right hon. Friend comes to consider any proposals put to him by West Sussex county council he will listen very carefully to all the arguments with an open mind.
I also reassure my hon. Friend that the regional strategy was never more than an advisory, and was not a mandatory, document. At the outset its advice should have been heeded, but its influence has diminished over time. As a consequence, following my right hon. Friend's letter, it is not necessary for it to be reviewed as has been suggested. As I said earlier, the letter endorses the concept of growth areas, but it does not presuppose the designation of such areas. It seems to me that a review of the structure


plan for West Sussex, and possibly Surrey, might be the better route by which to resolve the local objections that my hon. Friends have raised and to reduce the local

anxieties that my hon. Friends the Members for Mid-Sussex, Horsham and Crawley, East Grinstead and, above all, Eastbourne have skilfully drawn to the attention of the House.

Question put and agreed to.

Adjourned accordingly at eighteen minutes past Two o' clock.